PSU with min 25% public share holdings

2 min read

divestment in PSU holding is not just a function of the price at which the stocks are trading, but also a function of the maturity of the organisation to sustainably grow without much government direction.

Banks with low public share holdings

  • half of the 12 public sector banks do not meet the minimum public shareholding norms set by markets regulator Securities and Exchange Board of India (SEBI). 
  • this is not in contravention of the rules, since the government gave itself the power in 2023 to exempt Public Sector Undertakings (PSUs) from these requirements.
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PSUs with low public share holdings:

  • other financial PSUs — LIC, New India Assurance Company and General Insurance Corporation of India — with low public shareholding. The government shareholding in all three is above 85 percent, which means the public shareholding is less than 15 percent. 
  • also 62 non-financial PSUs, which are listed on the stock exchanges, do not meet the SEBI guideline for at least 25 percent free float shares.
  • Of these, nine companies, including SJVN, MMTC, Mazagon Dock Shipbuilders, Indian Railways Finance Corporation (IRFC) and India Tourism Development Corporation (ITDC).

SEBI requirements:

  • a promoter may hold a maximum of 75 percent share in a company, and 25 percent of the holding should be free float or, in other words, the shares should be held by the public.

Stock manipulation

  • You cannot manipulate the stocks of a large company like Reliance, Bharti Airtel, Infosys or ICICI Bank because the public float is too large, and even if the large operators gang up together, they cannot manipulate the price.
  • the requirement of minimum 25 percent public float is important as it helps prevent stock price manipulation.

Increase in demat accounts:

  • crossed the 150-million mark in March this year, a nearly three times increase from 40.8 million demat accounts at the end of March 2020. Print
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