SEBI-cleared IPOs out of 25% public float rule

Companies such as Reliance Infratel and IL&FS Transportation, which have got the regulator’s approval for initial public offers(IPOs) won’t be subject to the 25% mandatory public float proposed by the finance ministry, even if the much-awaited rule is implemented before they open their IPOs for bids.

The increased public holding proposal, first mooted by the ministry in 2008 and then by Pranab Mukherjee in his budget speech on July 6 last year, may be implemented from April, a senior official at the ministry said. But there is no official deadline yet on it. Those companies that are already trading on stock exchanges will get between 3-5 years to comply with the minimum 25% listing requirement, the official said.

“The average public float in Indian listed companies is less than 15%,” Mr Mukherjee had said in his budget speech. “Deep non-manipulable markets require larger and diversified public shareholdings. This requirement should be uniformly applied to the private sector as well as listed public sector companies.”

Many Indian companies, including Reliance Power and Wipro, have a public float of less than 25% which probably doesn’t reflect the true market interest since a lot of global funds avoid buying into companies which have a low float. The government’s measure could boost the confidence of global investors and reduce the chances of price manipulation in stocks.