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Finance Ministry May Transfer 5 Sick CPSE Shares To A Fund To Meet SEBI Norm

The Finance Ministry is planning to transfer shares of five sick central public sector enterprises, including HMT Ltd. and Andrew Yule & Company Ltd., to the Special National Investment Fund to meet the Securities and Exchange Board of India’s minimum 25 percent public shareholding norm.

The CPSEs whose shares would be transferred to the SNIF are Fertilizers and Chemicals (Travancore) Ltd., Hindustan Photo Films Manufacturing Co. Ltd., Scooters India Ltd., HMT and Andrew Yule & Company, an official said.

The Finance Ministry would be discussing with SEBI to allow transfer of shares in these companies to the SNIF to meet the 25 percent public holding norm for listed companies.

These companies have time till Aug. 21 to meet the 25 percent public shareholding norm.

“Since these CPSEs were not financially sound, meeting the minimum public shareholding norm by following SEBI’s method to reduce stakes would have been difficult. Hence, we are planning to transfer the shares to SNIF on a case-to-case basis,” the official told wire agency PTI.

Currently, the government holds a 89.25 percent stake in Andrew Yule & Company, 90 percent each in FACT and Hindustan Photo Films, 93.69 percent in HMT and 93.74 percent in Scooters India.

Accordingly, shares would be transferred on a proportionate basis to the fund to bring down the government’s stake in these CPSEs to 75 percent.

Also read: Finance Ministry May Write To SEBI For Relaxing Minimum Public Float Norms For PSUs

The government had in 2013 approved setting up of the SNIF with the specific objective of meeting the minimum public shareholding of 10 percent as was then mandated by SEBI.

At that time, there were six sick CPSEs whose shares were to be transferred to SNIF—FACT, Hindustan Photo Films Manufacturing, HMT, Scooters India and ITI Ltd. With ITI revival package in place, the telecom PSU has turned profitable after 16 years and reported a net profit of Rs 27 crore in the third quarter of 2017-18.

ITI will be launching a follow-on public offer to meet the 25 percent public holding norm. The government currently holds a 92.59 per cent stake in ITI.

The SNIF was formed to transfer the number of shares that is required to make the six sick companies compliant with the minimum public shareholding without any consideration.

The fund was managed by independent professional fund managers and was assigned to sell the shares within five years. The funds released from the sale of shares would be used for funding social sector schemes of the government.

To promote a wider investor base in listed state-run companies and boost the the government’s plan to raise funds from the disinvestment programme, SEBI’s board had in June 2014 asked the listed companies to offer at least 25 per cent of their equity to non-promoter shareholders.

Accordingly, the rules were notified for PSUs to achieve the minimum 25 percent public shareholding by Aug. 21, 2017, which was later extended by a year.

Also read: Government Clears New Norms For Time-Bound Closure Of Sick PSUs