SEBI's new move will help the government, promoters and investors

The Securities and Exchange Board of India's (Sebi) announcement of an institutional placement programme (IPP) and offer of sale of shares through the stock exchange kills two birds with one stone. The announcement makes it easier for government to sell up to 10% of its stake in listed public sector companies.

It also enables private companies to comply with the mandatory listing requirement of 25% public shareholding. The IPP allows promoters to either issue fresh equity or sell their holding by up to 10% of the total equity through an auction, albeit 'only for the purpose of complying with minimum public shareholding requirements'.

For a government faced with a huge shortfall vis-a-vis its disinvestment target of Rs 40,000 crore for the year and a yawning fiscal deficit, the IPP route should come as a welcome shot in the arm. The same logic holds for the facility to auction shares through a stock exchange for follow-on issues.

Both are designed to achieve speed, cost efficiency and transparency. Prima facie, the performance of our markets during the last calendar year might not enthuse too many investors. However, blue chips, including public sector enterprises such as Neyveli Lignite and Hindustan Copper, where government holding is over 90%, should find no dearth of takers.

Mutual funds and insurance companies - for whom a minimum of 25% of the offer is required to be reserved - are less influenced by temporary ups and downs of the market. To that extent they are unlikely to spurn good offers whether from the private or the public sector even in a tepid market. For private sector companies like Wipro and Adani Enterprises, where promoter shareholding is in excess of 75%, these additional channels are a handy way to bring promoter holdings within the mandatory ceiling.

Since the sale will be done through the stock exchanges, there will be much greater transparency, as well. For, regardless of what doomsayers may say, the India story is only temporarily dented; long-term growth drivers - our large domestic market, high domestic savings entrepreneurial spirit and, yes, our democracy - are still very much present. (Economic Times)