The Securities and Exchange Board of India (Sebi) on Friday warned promoters of about 180 companies to enhance their public shareholding to at least 25 per cent by June next year. U K Sinha, chairman, Sebi, said some companies feel the deadline will be relaxed but that’s unlikely to happen.
“The companies and their advisors are perhaps thinking the time limit will be extended. I want to make it clear that I am going to make it difficult,” Sinha said at a seminar on Investment Outlook 2012, hosted by the Indian Merchants’ Chamber (IMC).
Currently, 181 companies from the private sector and another 16 public sector undertakings (PSU) have promoter holdings of more than 75 per cent. These entities will have to sell shares worth a cumulative Rs 40,000 crore by August 2013 to meet the public shareholding norms.
| LOADED Top 5 public & private sector firms with high promoter shareholding | |||
| Public | Promoter holding (%) | Private | Promoter holding (%) |
| Coal India | 90.00 | Wipro | 78.41 |
| NTPC | 84.50 | Adani Enterprises | 78.32 |
| MMTC | 99.30 | DLF | 78.60 |
| NMDC | 90.00 | Reliance Power | 80.42 |
| Indian Oil | 78.90 | Adani Ports | 77.50 |
| Source: BS Research Bureau; Note: Latest available data | |||
In June 2010, the government had amended the Securities Contract (Regulations) Act rules, by ordering all listed companies to have a minimum of 25 per cent public shareholding. Sebi has set a deadline of June 2013 for all private sector companies and August 2013 for all PSUs to meet these norms. However, so far only a handful of these companies have conducted share-sales to enhance public holding. “Three years has been given, more than one and half years are over, but there is absolutely no movement towards it,” the Sebi chairman said.
Business Standard spoke to officials of some of the companies that have promoter holdings of more than 75 per cent. They maintain there is enough time to complete the process.
“As of now, we have not started our efforts to reduce promoter holding. But we have time till June 2013,” said an official with Adani Ports and Special Economic Zone, which has promoter holding of 77.5 per cent. An official at DLF Ltd, which had promoter holding of 78.6 per cent, also said the company has time till next year and it was awaiting some clarity on the issue from Sebi.
According to market experts, most promoters are holding back their stake sales on expectations these will fetch better valuations.
More From This Section
Abhay Bongirwar, managing director and chief executive officer at IDBI Capital Market Services, said, “There are not many push factors for promoters to sell their stakes. Neither price is the that good nor do have they any capex plans.” The delay is also because promoters feel there will be an extension of the deadline.
Vinay Menon, head of equity capital markets at JP Morgan India, said, “Promoters should have started offloading their stakes a little earlier but they feel these could fetch more value.” Menon believes the market depth is sufficient to absorb the huge supply of paper that will flow into it to meet the public shareholding norms.
“There is no reason to be worried, as proper mechanism has been laid out through an offer for sale (OFS) and institutional placement programme (IPP) route,” he said.
Sebi, in January, had introduced two new platforms for companies to sell stakes for the purpose of bringing down promoter holdings. So far, ONGC and Wipro have sold shares through the offer for sale or auction route, while Godrej Properties has used the IPP route to bring down promoter holding to 75 per cent.
According to Sebi data, as on February 29, 181 non-compliant private companies would have to sell shares worth Rs 27,000 crore and 16 PSUs would need to sell securities worth Rs 12,000 crore to meet the shareholding requirement.
About Rs 12,500 crore worth of shares will have to be sold by six private companies alone, while another eight companies will have to sell between Rs 500 and Rs 1,000 crore each totalling about Rs 5,300 crore.
(With inputs from Ahmedabad bureau)