The Ministry of Corporate Affairs (MCA) is out to boost the listing of public limited companies in the country.
While there are as many as 26,000 public companies in the country, only 5,000 are listed on stock exchanges, with a majority of the firms closely held or unlisted.
The ministry is planning to connect with industry associations to address the issue.
While public listing gives access to capital resources for companies and introduces transparency in corporate governance and public accountability to shareholders, the flip side is that firms also have to follow strong accounting and disclosure norms, in addition to playing listing fees to stock exchanges.
The government is keen to remove the impediments that keep the companies from listing.
“We will try and understand the problems that push these companies from not listing on the stock exchanges,” a senior MCA official told Hindustan Times.
The official, who asked not to be identified, said a key issue obstructing more listings is the cost of compliace (to listing rules), which the government expected to address soon.
A public company needs to have at least seven shareholders while for a private limited it is only two. All firms need to be “public” companies in order to get listed.
Initial public offers (IPO), through which companies list, have not taken off in the country in direct proportion to the revival in the capital market. During the bull phase of 2007, as many as 100 companies went for IPOs. In 2008, this number plunged to 37.
Analysts say the vibrancy of the primary market is linked to the buoyancy in the secondary market and sagging sentiments are stalling IPOs.
The government is keen to channelise a larger chunk of household savings into the stock market.
“We want to see more companies which meet the requirements to list so that savings can get channelised into the growth process of the economy,” the official said.