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Six companies, including Jaypee Infratech and Sun TV, managed on Wednesday to meet the minimum public shareholding norms as investors lapped up the shares they sold at below-market prices.
These companies offloaded shares worth Rs 900 crore on Wednesday, enabling their promoters to cut their holding to below 75 per cent of total equity, as required by the Securities and Exchange Board of India. The deadline for doing this is the coming Monday for private companies.
Another nine companies will sell shares worth Rs 900 crore tomorrow, as promoters rush to reduce their stakes before the deadline. Still, bankers said about 50 companies are yet to comply with the minimum public shareholding norm. Analysts believe a majority of the shares on the block will be absorbed because most of these are being sold at a discount and foreign institutional inflows show no signs of abating.
“Most share sales are likely to see full subscription, since they will be at a discount to their market prices. There is sufficient appetite in the market,” said Tirthankar Patnaik, strategist at Religare Capital Markets.
Offers for sale (OFSs) that hit the market on Wednesday saw an encouraging response from investors, with each of these seeing more demand than the shares on offer. Sun TV, the south-based media house, raised nearly Rs 330 crore, getting a subscription of a little over three times what was offered. Jaypee Infratech raised Rs 562 crore, being subscribed 1.43 times. The share-sales that hit the market on Wednesday were priced at a discount of between three and 25 per cent.
Investors will be eyeing fairly large share-sales of Adani Enterprises, Jet Airways and Essar Ports tomorrow. Six other companies will launch OFSs worth less than Rs 50 crore each. Patnaik believes the smaller-sized issues can be easily absorbed by the markets.
Jet Airways has fixed its floor price at a five per cent discount. That of Novartis is as much as 33 per cent.
However, the OFS rush could put temporary pressure on secondary markets, as well as on the stock prices of these companies.
“The additional shares that would come into the market could negatively impact the stock prices of these companies as promoters offer discounts to investors,” said Pankaj Pandey, head of research at ICICI Direct.
The deadline for meeting the minimum public shareholding norms is August 9 for state-owned companies. According to Kotak Institutional Equities Research, on May 23, close to 75 private companies and 12 public companies were yet to comply. Since then, about a dozen had launched an OFS to do so.
