India: Attack of the Sebi
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CAPITAL MARKETS

India: Attack of the Sebi

New rules force 25% minimum free float; Rs615 billion of state issuance in first year

  Sebi HQ: new rules to boost the free float of local firms
Sebi HQ: new rules to boost the free float of local firms

Every few years, New York’s police officers wage war on United Nations ambassadors. Infuriated by the latter’s tendency to park their cars where they want, when they want, the NYPD wakes up one morning and goes into battle, clamping or towing any vehicle with diplomatic tags. India’s market regulator acts much the same way. Roughly twice a decade the Securities and Exchange Board of India (Sebi), frustrated at all-too-common market manipulation at home, launches a campaign against its own component companies to boost liquidity and transparency among India-listed stocks.

Sebi’s latest gambit came in June when it rolled out new rules forcing 156 locally incorporated firms with marginal public holdings to boost their free float to at least a quarter of issued equity within the next five years.

That left several leading corporations, many tightly held by the state, with a black-or-white decision: delist or dilute.

In theory, Sebi’s move is more evolution than revolution. Indian companies have been here before. Back in May 2006 the regulator passed a law forcing several smaller Indian stocks to either maintain promoter-holding levels below 75% or delist entirely.

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