The Securities and Exchange Board of India has given in principle approval, allowing companies with substantial market capitalisation to remain listed even if non-promoter holdings fell below 25 per cent.

This is a change from its earlier stance that only those companies with at least a quarter of their shares with the public can remain listed on the exchanges.

According to a proposal approved at a Sebi meeting on Monday, companies with at least Rs 1,000 crore (Rs 10 billion) capitalisation or 20 million shares with the public do not need to meet the 25 per cent cut-off mark for public-shareholding.

"The numbers have been extrapolated based on the provisions of Section 19(2)b of the Sebi Act," a Sebi official said. Earlier, only companies which had made their initial offers with less than 10 per cent of their total holdings were allowed an exception.

Among other proposals and recommendations approved include putting an end to amortisation of issue expenses by mutual funds. According to the new rules, amortisation of expenses will be allowed only in case of closed-end funds.

In case of open-end funds, exiting investors will have to pay their shares of expenses to  fund schemes so that the remaining investors do not have to bear the burden of higher expenses.

Until now, many fund houses run up huge expenses during initial fund offers which are later recovered from all the investors over a period of five to six years.

According to experts, this has led to high churning as investors tend to get out of a new fund to escape paying their shares of such initial expenses, which, according to the law, can be up to six per cent of the corpus collected.

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