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More than 63.7 million shares of HUL worth nearly Rs 4,000 crore are held in physical format. Sources close to the development said a large portion of these shares were tendered in the open offer as investors grabbed the opportunity to monetise their holdings without having to convert them into dematerialised (demat) form or electronic form.
The Rs 29,200 crore-voluntary open offer by Unilever Plc, which ended last week, was subscribed 66%, helping the world's leading home and personal care products increase stake in its Indian arm to 67.3% from 52.5%.
Several market analysts had raised doubts over the success of Unilever's Rs 600 a share offer after HUL's secondary market price has soared close to the open offer price.
Between June 21 and July 4 when the open offer was on, shares of HUL moved in the range between Rs 585 and Rs 600 per share.
“Several shareholders holding HUL shares in paper format chose to tender their shares as they were able to cash in without opening any demat account. Most of these shareholders have been reluctant to convert their holdings into demat due to the cost and hassles involved,” said a source requesting anonymity.
Official data on shares tendered by such investors is still not available.
Over a fifth of the subscription would have come from investor holding shares in physical format assuming all of them would have tendered. This could have proved vital for Unilever as several large institutional shareholders in HUL, including Aberdeen and LIC had decided not to tender part with their holdings as not much was left on the table.
Brokers said the open offer was a good opportunity for physical shareholders to sell their shares, which otherwise is a tedious process.
Most of the physical shares of HUL are held by retail investors. According to BSE shareholding data, there are about 3.4 lakh individual shareholders in HUL holding shares worth less than Rs one lakh.
In the past, HUL with the help of some brokers had gone on a drive to encourage it large section of shareholders holding shares in paper format to demat format but the initiative didn't prove to be too much of a success, said brokers.
“We had gone on a drive to convert demat shares into physical. But most shareholders were unwilling due to the cost involved in opening a demat account. Most investors were asking it for free, which was of no incentive to us,” said a official with a domestic brokerage.
Conversion of physical shares to demat includes opening of a depository account with a depository participant (often a broker) and other formalities.
Currently, investor are allowed to hold shares in the physical form as dematerialisation is optional, however promoters compulsorily need to convert their holdings into demat form.
Process of converting physical shares into demat
- Open an account with a depository participant (DP)
- Surrender physical certificates to DP
- DP intimates to the depository regarding the request
- DP submits the certificates to the registrar of the issuer company
- Registrar confirms the dematerialisation request from depository
- After dematerialising the certificates, registrar updates accounts
- Depository updates its accounts and informs the DP
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DP updates the demat account of the investor
Source: Sebi
