Criticising the government and corporates for over-pricing public issues, Deepak Parekh, who heads a key SEBI committee, said that all listed companies should be made to increase their public exposure to 25 per cent within a year to help tackle the problem.
"Tell me one IPO that has succeeded," asked Parekh, who heads the Primary Market Advisory Committee of market regulator SEBI, when asked about the lukewarm response to the first every Indian issue by a global entity. Elaborating, Parekh, who is Chairman of HDFC, told PTI: "Our issuers (entities coming out with public offers) don't want to leave money on the table. They want to maximise the price. You need to have a heart to give money and let others make money."
On the government's failure to evoke a good response to its public issues to divest stake in different PSUs, he said, "(Even) the government does not want to leave money on the table... it wants to avert criticism that it gave it (PSU shares) too cheaply."
Asked about the 25 per cent mandatory public holding in listed companies, an issue on which differences have surfaced between the government and SEBI, he said that it should be done in within a year. The Finance Ministry had in 2008 proposed raising public exposure in listed companies to a minimum 25 per cent to cut risk of share price manipulation.
The argument was that larger the number of shares and the number of shareholders, the less is the scope for price manipulation. At present, most companies dilute just 10 per cent stake and the shares tend to trade at a premium. "I will push for it. 25 per cent is necessary," Parekh said, adding that such a situation would help more shares in investors hand for trading purposes and help make pricing (of public offerings) more realistic.
Among the leading PSUs where promoter or government holding is well above 75 per cent are MMTC, NMDC, Hindustan Copper, Power Grid, NTPC, SAIL, Shipping Corporation, Neyveli Lignite. In the same league are some of the private companies like Wipro, DLF, Reliance Power, Mundra Port and TCS.
"It is easy to seek a 10 per cent issue rather than 25 per cent issue...so if the amout of issue is larger, they have to keep the price right," Parekh noted. Asked what was SEBI's reservation on this issue, he said that some companies are very large and they might not want to sell 25 per cent in one go, but that can be done gradually.
On the pricing, Parekh said that promoters tend to forget that they were selling only 10-20 per cent of the company and not the entire company.
