Sebi Tweaks MPS Norms For Firms Undergoing IBC Proceedings

The capital market regulator Securities and Exchange Board of India (Sebi) has tweaked the Minimum Public Shareholding (MPS) norms for listed companies facing bankruptcy under the Insolvency and Bankruptcy Code (IBC) and get relisted on the stock market.

A decision in this regard was taken at the Sebi board meeting held in Mumbai. Post this decision, such companies will be mandated to have at least 5 per cent public shareholding at the time of their re-admission to dealing on stock exchange, as against no minimum requirement at present.

Currently, during Corporate Insolvency Resolution Process (CIRP) where the public shareholding falls below 10 per cent, such listed companies are required to bring the public shareholding to at least 10 per cent within 18 months and 25 per cent within 36 months.

"Further, such companies will be provided 12 months to achieve public shareholding of 10 per cent from the date such shares of the company are admitted to dealings on stock exchange and 36 months to achieve public shareholding of 25 per cent from the said date," Sebi said.

The lock-in on equity shares allotted to the resolution applicant under the resolution plan shall not apply to the extent to achieve 10 per cent public shareholding within 12 months.

Sebi in a statement said that such companies will be required to make additional disclosures, such as, specific details of resolution plan including details of assets post-CIRP, details of securities continuing to be imposed on the companies' assets and other material liabilities imposed on the company.

The company will also have to lay down the proposed steps to be taken by the incoming investor or acquirer for achieving the MPS and quarterly disclosure on the status of achieving the MPS.

The Sebi move follows after the massive surge in Ruchi Soya's share price, post its relisting earlier in January this year, where the public shareholding was at a meagre 0.97 per cent.

After its acquisition by Patanjali Ayurved, Ruchi Soya shares were re-listed on BSE on January 27. It’s closing price on the day was Rs 16.90 and in June, it touched a high of Rs 1,507.30 per share.

Market experts raised concerns on the sharp rise in Ruchi Soya share prices in less than five months after re-listing, particularly with a thin public shareholding. 

BSE data shows that at the end of September quarter, the public shareholding in Ruchi Soya stands at 1.06 per cent and the promoter shareholding at 98.94 per cent.