Analysts worry very high price of MMTC share due to less than half a per cent public holding in the company could prove a problem for the public sector undertaking as it moots its actual share price for public issue.
MMTC is the highest quoted scrip on the stock exchanges in India and has poor liquidity as 99.33 per cent of its shares are owned by the government.
However, the Rs 45,260 crore trading giant has come under the disinvestment radar after the goverment mandate last month, which asked all public and private sector companies to allow a minimum of 25 per cent stake for public holding.
In a move towards disinvestment, the company with interests in agricultural, industrial commodities and gold trading, has proposed splitting its Rs 10 share into ten shares with the value of Re one each. It has also announced bonus issue of one-for-one share to its shareholders.
"Naturally, it is a move in the direction of disinvestment," a source close to the company management said.
Quoted at Rs 30,916 in the stock market, MMTC has an astronomical price-to-earning (P/E) ratio of 721 as per today's closing price. The P/E ratio shows how many times the share is quoting in the market relative to its earning per share. The EPS of MMTC is Rs 43.25.
Though the total number of MMTC shares is five crore, there are only 5,736 shareholders, of which the President of India holds 4.96 crore shares, which are not traded in the market, says the latest shareholding pattern posted on the website of the Bombay Stock Exchange.
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The shares owned by individuals holding capital up to Rs 1 lakh account for 0.03 per cent of the total equity of the company. Analysts suggests that the shareholding pattern clearly shows that it is only a few shareholders who decide the price and that the exchange price does reflect its actual value.
"The company has minuscule shareholders and this does not give the real value of the stock, which is traded at an astronomical price on the bourses," CNI Research Chairman and Managing Director Kishore P Ostwal said.
While the company seems to be heading in the disinvestment direction, the shareholding pattern suggests that the company will find it difficult to price the share for the public issue.
Institutions comprising mutual funds, financial institutions, banks and foreign institutional investors hold 0.63 per cent, or 3,15,424 shares in the company. According to company sources, LIC mutual funds and ICICI Securities also hold MMTC shares.
ICICI Bank held 28 shares.