Minimum public shareholding

The requirement that a listed Indian company keep at least 25% of its shares in public hands, which caps promoter holding at 75%.

A newly listed company that does not yet meet the threshold has to reach it within prescribed timelines, and very large issuers are given longer.

The rule exists to ensure a genuine market in the shares. Where a promoter holds 90%, the traded price is set by a tiny float and means very little, and minority holders have no practical exit.

The rule also creates predictable supply. A promoter above the ceiling has to sell, and the market usually knows it.

The rule also produces a predictable, dateable supply of stock. A promoter above the ceiling has to sell, the market knows it, and the overhang usually depresses the price until the sale happens. Newly listed companies given longer timelines carry the same overhang further out.