LIC Granted Extension for Minimum Public Shareholding (MPS) Compliance

LIC Granted Extension for Minimum Public Shareholding (MPS) Compliance

Subject :Economy

Section: Capital Market

1. SEBI’s MPS Norms:
   • SEBI (Securities and Exchange Board of India) has prescribed Minimum Public Shareholding (MPS) norms for listed companies.
   • Rule 19A of the Securities Contract Regulation Rules states that every listed company, except public sector companies, should maintain a public shareholding of at least 25%.
2. LIC’s Ownership Structure:
   • As of September 30, 2023, the government owns 96.5% of LIC (Life Insurance Corporation of India).
   • The government had divested 3.5% of its shareholding in LIC, and the company got listed on stock exchanges.
3. Exemption Granted:
   • The Department of Economic Affairs, Ministry of Finance, has granted LIC a one-time exemption to achieve 25% MPS within ten years from the date of listing, i.e., until May 2032.
   • This exemption is in the public interest and aligns with Rule 19A(6) of the Securities Contract (Regulations) Rules 1957.
4. SEBI Regulations:
   • Rule 19A(6) allows a listed company to have three years from the date of listing to ensure MPS.
   • The objective is to encourage broader public shareholding, including individuals and institutions.
5. Finance Ministry’s Earlier Statement:
   • Earlier, the Finance Ministry stated that a listed public sector undertaking (PSU) would continue to be exempt from MPS norms for a specified period.
   • The exemption applies to entities where the Central Government, State Government, or public sector company holds the majority of shares, voting rights, or control.
6. Exemption Duration:
   • The exemption specified by the Economic Affairs Department for LIC will be valid until May 2032.
   • It continues irrespective of any change in control of LIC after the issuance of the exemption.
   • This exemption provides LIC with an extended timeline to meet MPS norms, contributing to the government’s ongoing disinvestment strategy for the insurance giant.

Minimum public shareholding requirement

• Securities and Exchange Board of India (SEBI) mandates a minimum public shareholding requirement for listed companies in India. The minimum public shareholding norms are outlined in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
• As per these regulations, a listed company is required to maintain a minimum public shareholding of 25%. This means that at least 25% of the total shares of the company should be held by public shareholders, which include individual investors, institutional investors, and other non-promoter entities.
• Companies are expected to comply with this requirement within a specified timeframe from the date of listing. In case a company does not meet the minimum public shareholding criteria, it may be required to take necessary steps to achieve compliance. Failure to comply with SEBI’s regulations can lead to penalties and other regulatory actions.