MNC delisting may accelerate

SEBI ORDER ON IPO NORMS

This follows new norms to scale up free-float to a minimum 25% within 2 years.

A string of multinational companies holding close to 90 per cent stake in their Indian subsidiaries may like to delist their domestic arms from Indian bourses, investment bankers have said.

This follows the Securities and Exchange Board of India's new norms to scale up free-float to a minimum 25 per cent within two years.

Experts said MNCs and their Indian associates that held just a shade less than 90 per cent in their Indian subsidiaries"" the existing laws allow promoters to hold up to 90 per -- would find it difficult to scale down their stake to 75 per cent in the next two years. They added that some MNCs had been increasing stakes in their Indian arms, under the veil of consolidation exercise, with an aim to delist them in future.

"They are unlikely to reverse the move. The Sebi diktat, in fact, will push them to go for delisting Indian subsidiaries early," merchant bankers pointed out. They added that companies where foreign promoters held stakes much below 75 per cent would continue to be listed while firms with foreign promoters holding well above 75 per cent would go for delisting.

By this logic, the list of the companies that may go for delisting includes Gillette India (foreign promoters and their Indian associates hold 88 per cent), AstraZeneca Pharma (90 per cent), Wartsila India (89.69 per cent), Whirlpool of India (82.33 per cent), Saint-Gobain Sekurit (85.77 per cent), Panasonic AV (83 per cent), and Siemens VDO Automotive (84.74 per cent). Foreign promoters and their Indian associates hold about 92 per cent each in Electrolux Kelvinator and Hindustan Powerplus.

Mahesh Singhvi, managing director of Singhvi & Associates, said the MNCs would come out with reverse book-building to delist their Indian subsidiaries. In case they wanted to continue with the Indian stock markets, they would offer a preferential allotment of equity shares or public issues to bring down the promoters' stake in two years, he added.

Manish Thakkar, vice-president of ICICI Securities (I-Sec), said the principles of the MNCs would guide their future course of action.

"Some MNCs like Cadbury work through closely-held companies across the globe. Cadbury has already delisted the Indian subsidiaries. On the other hand, MNCs like Glaxo and HLL operate through local listed subsidiaries worldwide. The underlining principle of an MNC will decide whether to continue with the Indian bourses or not," he said.

The delisting of shares of the Indian subsidiaries of MNCs has been in vogue for quite sometime now. The government had, in 2002, appointed a committee to probe the reasons for the spate of delisting and its impact on the Indian capital market.

The parliamentary standing committee on finance in 2002 had said the delisting of shares by multinationals would erode investor confidence and had asked the government to lay down a clear policy on this issue. It also said the government should not accept their requests to defer their initial public offerings.

MNCs that have delisted from the Indian bourses include Cadbury, Reckitt Benckiser, ITW Signode, Otis, Aventis CorpScience, Carrier Aircon and Philips.