The regulator has mandated that all private companies should have at least 25 per cent public shareholding by June 3. Brokerages estimate that companies will have to sell stake worth $2 billion or around Rs 11,000 crore over the fortnight to meet the deadline.
A report from Macquarie Capital Securities dated Friday suggested companies might have to offer discounts to make sure their shares are absorbed.
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"We think the market may not have significant depth to absorb these issues unless priced attractively. With average monthly FII flows slowing from $2.6 bn to $1.3 bn and the lack of interest from domestic investors, the sudden drain of liquidity could put pressure on the market in the near term," said the report and authored by Rakesh Arora and Arjun Bhattacharya.
Another report, this one from BNP Paribas entitled, 'Free float - Near-term hiccup for some' also, noted that share prices could head lower.
"The promoters have to sell by a certain date but the buyers are not forced to buy….This, in our view, creates downside risk to the share prices of companies that need to increase freefloat," it said in a report dated May 15 and authored by Manishi Raychaudhuri and Gautam Mehta
Macquarie expects that of the 28 companies yet to meet the target, six are public sector undertakings with an estimated $685 million in issue size, 13 are Indian private sector companies aggregating an estimated $740 mn and nine are subsidiaries of foreign companies with an estimated issue size of $543 mn.
Sonam Udasi, head of research at IDBI Capital suggests the upcoming stake sale may take some doing to pull-off.
"Sentiment has not improved to absorb the issue from the vast majority of stocks which will have to hit the market… There will be some overhang on these stocks," he said.
Anish Damania, business head - institutional equity at Emkay Global Financial Services too, said there may not be enough takers. "Everybody is once again looking to hit the market, it is difficult to say if all of them will be successful," he said.
Interestingly, Macquarie has noted that the recent offer-for-sale, a means of meeting the shareholding norms, show that average private sector company performance (4.9 per cent) has been better than the average PSU performance (-3.6 per cent) post sale.
- 28 companies need to meet shareholding norms
- $2 billion worth of share sales in 2 weeks
- Markets nearing highs but sentiment still wary
- Shares likely to be under pressure
- Discounts likely, according to brokerages