At a time when investors are struggling to make gains in a volatile stock market, minority shareholders of multinational corporations (MNC) having public shareholding less than 25 per cent, are laughing all the way to the bank.
The promoters of Alfa Laval, on Monday, had fixed a final price of Rs 4,000 a share, as the exit price for accepting shares successfully tendered in the delisting offer. The stock has appreciated 214 per cent from Rs 1,275 on June 4, 2010, since the implementation of new listing norms, and almost doubled after the company’s announcement of delisting plans on September 16, 2011.
As per the guidelines of market regulator Securities and Exchange Board of India (Sebi), all private sector listed corporates must have at least 25 per cent public holding. Companies that have promoter holding over 75 per cent have time till June 2013 to comply with the regulations.
There are about 22 MNCs in which promoters hold more than 76 per cent stake each, as of quarter ended December 2011, according to the shareholding pattern filed by the companies. Of this, the market price of almost half or ten companies have more than doubled from their June 2010.
These 22 stocks have given an average 59 per cent returns, compared with less than two per cent increase by the benchmark equity indices. The National Stock Exchange CNX MNC Index, which tracks the price movements of the sector, gained 11 per cent during the period.
Anglo-Swedish drugmaker AstraZeneca and US-based industrial tool maker Kennametal too, proposed to delist their Indian units, but failed after their shareholders rejected the share buyback proposals, sending both stocks soaring by over 90 per cent.
Also Read
The delisting regulations now require companies to take their shareholders along because even if success is achieved in passing enabling resolutions, the subsequent reverse book-building process will require shareholders’ co-operation for a successful delisting. In the reverse book-building process, shareholders indicate to the company the price at which they would be willing to sell.
Market experts feel, considering the nature of the MNCs, the foreign parent companies may choose the route of delisting as these firms may not be willing to offload their stakes. A K Prabhakar, senior VP - equity research, Anand Rathi Securities feels these stocks still have potential to rally 8-10 per cent from the current levels.
However, Kishor Ostwal, chairman and managing director of CNI Research said, “There is an alternative route provided to sell excess holding through exchange window to preferred investors. That could be an ideal way for big MNCs to sell some stake instead of de-listing at a huge cost.”