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Synopsis: Public sector banks, including UCO Bank, Indian Overseas Bank (IOB), IDBI Bank, Bank of Maharashtra, Punjab & Sind Bank, and Central Bank of India, are set to be in focus on Dalal Street as they strive to meet SEBI's minimum public shareholding (MPS) norms of 25% over the next few months. This move follows a directive from the government, aiming to reduce its stake in these banks to comply with regulatory requirements.
Out of 12 public sector banks (PSBs), half currently fall short of SEBI's minimum public shareholding norms of 25%. The six banks in question include UCO Bank, Indian Overseas Bank (IOB), IDBI Bank, Bank of Maharashtra, Punjab & Sind Bank, and Central Bank of India. The government is working on strategies to increase public shareholding in these banks, as confirmed by Ajay Seth, Economic Affairs Secretary.
According to SEBI regulations, companies must have at least 25% of their shares held by public shareholders, with the remaining 75% held by promoters. While there has been some leniency for state-owned banks, they must meet this requirement by August 2024. This initiative is part of a broader government effort to enhance transparency and reduce stock price manipulation.
Currently, the public shareholding percentages in these banks are significantly below the required 25%: Punjab & Sind Bank at 1.8%, IOB at 3.6%, UCO Bank at 4.6%, IDBI Bank at 5.3%, Central Bank of India at 6.9%, and Bank of Maharashtra at 13.5%. The government plans to achieve compliance through methods such as follow-on public offerings (FPOs) and Qualified Institutional Placements (QIPs).
Experts like Kranthi Bathini of WealthMills Securities highlight that achieving a 25% public float is crucial for preventing stock price manipulation and maintaining market integrity. G Chokkalingam of Equinomics Research adds that the current market conditions, with PSBs trading at high price-to-book value multiples, make this an opportune time for the government to unlock value through stake sales or strategic disinvestment.
In addition to these six banks, other financial PSUs like Life Insurance Corporation of India (LIC), New India Assurance Company, and General Insurance Corporation of India also have low public shareholdings, with government stakes exceeding 85%. The interest in PSUs has surged due to their significant returns and increased market capitalization, driven by better capital management and higher government expenditure.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult with a financial advisor before making any investment decisions.
