As per the minimum public shareholding norms, government-run companies shall have a minimum public float of 10% by August and private sector companies had to bring down promoter stake to 75% by 3rd June this year

The Securities and Exchange Board (SEBI) on Thursday said the government has assured it that the public sector units will meet the August deadline to bring down their promoter stake to 90%.

“I have been assured by the government that they will follow the deadline,” SEBI chairman UK Sinha told reporters on the sidelines of the Skoch banking summit in Mumbai.

As per the minimum public shareholding norms, government-run companies shall have a minimum public float of 10% by August and private sector companies had to bring down promoter stake to 75% by 3^rd June this year.

Currently, there are about 11 PSUs in which the government holds over 90% stake. These include MMTC, HMT, National Fertilizers, Neyveli Lignite Corporation, RCF, State Bank of Mysore and STC.

Despite giving three years to the private sector companies to reduce promoters stake, as of 3^rd June, there were as many as 105 companies which failed to meet the deadline forcing SEBI to take punitive actions against them.

On retail participation in the secondary market, Sinha said this is not at a level to be very happy about. “We had a requirement that promoters must have less than 75% shareholding in a company.

"In spite of three years of time being given, while a large number of corporates followed our guideline, over 100 of them for some reason or the other could not do that. Very reluctantly SEBI had to take action against them two days ago,” he said.

Stating that higher public shareholding and faith in diversified ownership and governance is important, he said "we believe if these things are implemented and followed, it will generate a lot of trust in the market.”

Sinha further said, “The country ranks 132 out of 185 for doing business. Some parameters of the financial sector are not doing badly. In protecting the interest of investors we rank 49 and in financial market development, we rank 21 and we are at 19 in raising equity”.

The risk management system in the country has proven to be very helpful and has been able to generate trust which is required in capital market, he noted.

Mutual funds have seen higher inflows. In 2012-13, “we saw net inflow increase of 100 bps in flows from beyond top 15 cities”.

FIIs in this calendar year have poured $20 billion and in the past two months it stood at $7 billion, reflecting their faith in our markets, he said.

However, he expressed concern about the quality of corporate governance and said: “we have come out with a discussion paper on corporate governance and our belief is that unless we are able to generate confidence in the market ecosystem, retail investors will leave or stay away from the market,” Sinha said.