New Delhi, Feb. 1: The government is planning to make it mandatory for all listed companies to have a public shareholding of at least 25 per cent — with no relaxation in rules for state-owned companies or software firms that have ducked the proviso until now under a special waiver from Sebi.

Four of the 30 sensex stocks — NTPC, DLF, Wipro and TCS — have a public float of less than 25 per cent and could be affected by any move to force a stake dilution by the promoters.

The finance ministry today proposed far-reaching changes in the listing requirements for Indian companies in a discussion paper that invited comments by the end of this month. The paper also proposed to clearly define the world ‘public’. It said the word should not be seen as an umbrella term to include all non-promoter holdings, covering financial institutions, foreign institutional investors, mutual funds, employees, non-resident Indians and overseas corporate bodies.

Such a definition makes “the actual floating stock insignificant”, the paper said.

The prices of companies with a low floating stock are easily manipulated as even a small trade can lead to wide price swings.

The government wants a narrower definition of public holdings in an effort to raise the number of small shareholders.

The paper said that a company must have a public stake of 25 per cent at all times to remain listed.

If for any reason, the public holding drops below 25 per cent, the promoters, management and the company will be obliged to raise the public holding to 25 per cent within three months. If they fail to do so, appropriate action, including delisting, may be taken.

The paper also proposed to withdraw the discretionary powers of the Securities and Exchange Board of India (Sebi) to relax listing requirements.

Back in the mid 1990s, the capital market watchdog allowed software companies to list on the bourses without having to dilute the promoters’ stake to less than 75 per cent.

Wipro’s Azim Premji and DLF’s K.P. Singh are among the wealthiest Indians because of their large holdings in their companies.

A top finance ministry official in the capital markets division said the insistence of a 25 per cent public stake at all times was designed to stop promoters from raising their stake in the companies after the initial public offering through special warrants or other equity-related instruments.

A special dispensation currently exists for state-owned companies and information technology (IT) firms which are allowed to have lower listing requirements. “These will go; we are saying that all companies have to be treated equally. There cannot be exceptions to the rule. Nobody is special,” the official added.

He said the power of Sebi to relax listing requirements should be withdrawn. “The rationale of all this is that a large number of shares distributed among a large number of shareholders is essential for the development of a healthy stock market. If the public float is large, there will be less scope to manipulate prices.”

According to Kajal Jain, a banking analyst at ICICIdirect.com, “The proposed amendment is aimed at real estate firms and IT companies who have more than a 75 per cent promoter holding.”

The new requirement – if enforced — could have serious implications for companies such as TechMahindra, Omaxe, Shobha Developers, and NTPC which have a public shareholding of under 25 per cent.