Several PSU Stocks Still Non-Compliant with Public Shareholding Norm

Even after being listed for years, several public sector undertakings (PSUs) have not yet complied with SEBI’s minimum public shareholding norms. As per the latest data till March 31, 2025, a number of state-run companies continue to have promoter holdings exceeding 85%, which is well above the permissible limit.

Which PSUs Are Involved?

Some of the prominent PSUs still breaching the public shareholding rule include:

• Madras Fertilizers

• New India Assurance

• Mangalore Refinery and Petrochemicals (MRPL)

• MMTC

• ITI Ltd.

• HMT Ltd.

• UCO Bank

• Central Bank of India

• IDBI Bank

These companies continue to operate with heavy government control, with limited public float available to general investors.

What Is the Public Shareholding Rule?

SEBI mandates that all listed companies must maintain a minimum public shareholding of 25%. This rule is meant to:

• Improve liquidity in stocks

• Encourage greater retail participation

• Ensure market transparency

However, these PSU companies are yet to meet this requirement, raising concerns around low free float and restricted investor participation.

Why the Delay in Compliance?

There are multiple reasons why some PSUs haven’t met the 25% public shareholding requirement:

• Strategic importance of certain companies to the government

• Disinvestment delays due to market conditions or policy changes

• Operational restructuring or ongoing turnaround plans in some banks and manufacturing PSUs

The government may also be deliberately pacing divestments to manage fiscal targets and market reactions.

What This Means for Investors

For retail investors, low public shareholding typically results in:

• Lower liquidity, making it harder to buy/sell in large volumes

• Higher price volatility due to limited float

• Limited institutional interest in such stocks

Despite being listed, many of these PSUs behave more like closely held entities, which limits their attractiveness for active traders and long-term investors alike.

Final Thoughts

As SEBI continues to push for better compliance, these PSUs may eventually have to increase their public shareholding. However, until then, investors are likely to remain cautious about companies that fail to meet regulatory norms, especially when it affects trading volumes and price discovery.

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