Market watchers say Sebi proposal, if accepted, will boost retail participation, level the equity arena with private companies

The Securities and Exchange Board of India’s (Sebi) move to raise the minimum public shareholding in government-run companies to 25 per cent can drive more retail investors to the capital market, experts say.

Small investors and those who became averse to equities’ investing after the 2008 stock market crash, could be more than willing to participate in future divestments following an improvement in sentiment towards public sector undertaking (PSU) stocks, they said.

Also, attractive gains in some of the recent government disinvestments, such as Power Grid, Engineers India and the CPSE exchange traded fund, could encourage new investors.

“There will be enough appetite for share sale of PSUs. These companies already being listed, their performance and quality is already known to the market. Retail investors will invest aggressively if the new government also continues to offer additional 10 per cent discount,”said Prithvi Haldea, chairman, Prime Database.

Capital market regulator Sebi has written to the finance ministry, proposing a mandatory public float in PSUs of at least 25 per cent from the current 10 per cent. The proposal, if accepted, will see the government divesting stakes worth Rs 55,000 crore in 30 companies where it currently has more than 75 per cent stake.

“Historically speaking, PSU disinvestment in India has triggered a huge wave of new investors to enter the capital markets through Initial Public Offers (IPOs). The Coal India IPO alone has brought several lakhs of new investors into the markets,” said Jagannadham Thunuguntla, head of research, SMC Global Securities.

The Rs 15,000-crore IPO of Coal India in 2010 had attracted 1.7 million retail applications. The follow-on public offers (FPOs) of Engineers India and Power Grid in 2013-14 saw encouraging retail participation.

For more visit: Business Standard

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