Union Budget 2019: Threshold for Minimum Public-Shareholding in listed companies to go up to 35%

Union Finance Minister Nirmala Sitharaman on July 5, 2019, presented the Union Budget that is readying itself to go be a “$5 trillion economy” by 2024. She says, for an investment-driven growth, India requires access to low-cost capital as it requires investment averaging Rs 20 lakh crore annually. For the purpose, the Finance Minister has proposed several measures. They include:

For Infrastructure Financing: To enhance the sources of capital for the infrastructure financing, a credit guarantee enhancement corporation -  for which regulation has been notified by the RBI - will be set up in 2019-20. 

Long-term bonds: An action plan to deepen for long-term bonds including for deepening markets for corporate bond reports and credit default swaps among others with a specific focus on infrastructure sector will be put in place. 

To encourage FIIs and FPIs: The government has proposed to permit investments made by FIIs and FPIs in debt securities issued by infrastructure debt fund, non-bank finance companies, the IDF, NBFCs to be transferred, sold to any domestic investor within the specified lock-in period.  

Corporate Debt Markets: Corporate debt markets are crucial for the infrastructure sector given a need to further deepen bond markets. A number of measures are proposed to be taken up. To deepen the corporate tri-party repo market in corporate debt securities, the government will work with regulators, the RBI and the SEBI to enable stock exchanges to allow AA rated bonds as collaterals. Use of friendliness of trading platforms for corporate bonds will be reviewed including issues arising out of capping of the international security identification number, the ISIL. 

Public-shareholding in the listed companies: It is the right time to consider increasing minimum public-shareholding in the listed companies. I have asked SEBI to consider raising the current threshold of 25% to 35%.

Foreign portfolio investors (FPIs): They are the key source of the capital to the Indian economy and that’s why it is important to ensure a harmonised and hassle-free investment experience for foreign portfolio investors. For the purpose, the finance minister has proposed to rationalise and extreme line the existing Know your Customer (KYC) norms for FPIs. It will be made with an aim to make it more investment-friendly without compromising the integrity of cross-border capital inflows. 

Inclusive growth and financial inclusion: FM Sitharaman says, this is time to take the capital market closer to the masses and meet various social welfare objectives related to inclusive growth and financial inclusion. For this propose the government will initiate steps towards creating an electronic fund-raising platform from social stock exchange under the regulatory ambit of the SEBI for listing social enterprises and voluntary organisations working for the realisation of the social welfare objective so that they can raise capital as equity, debt or as units like a mutual fund.

Treasury bills and securities of Government: It is important to get retail investors to invest in treasury bills and securities issued by the government. Efforts made by the reserve bank will need to be supplemented with further institutional development using stock exchanges. For this purpose, inter-operability of RBI depositories and SEBI depositories would be necessary to bring about a seamless transfer of treasury bills and government securities between RBI depository lenders. To enable this the government will take necessary measures in this regard in consultation with RBI and the SEBI.