10% additional public shareholding to generate Rs 3.9 tln in

The Budget proposal to increase the minimum public shareholding by 10 percentage points to 35 percent can lead to promoters diluting their holdings worth over Rs 3.87 trillion, say experts.

However, most marketmen and analysts have flagged concern on such a measure, saying it should not result in "forced sales" of promoter stakes and the maximum sales proceeds will come from TCS (Rs 59,600 crore), Wipro (Rs 15,000 crore) and D-mart (Rs 14,000 crore).

Domestic brokerage Centrum Broking said a fourth of all the listed companies or 1,174 to be specific, have promoter shareholding above 65 percent at present.

"At the current market prices, the total quantum of sale that needs to be done by these 1,174 companies works out to be a whopping Rs 3,87,000 crore," its head of research Jagannadham Thunuguntla said.

 

Law firm Shardul Amarchang Mangaldas partner Yogesh Chande warmed that the move may force some companies, especially the multinationals, to explore delisting.

Consultancy firm KPMG's Vivek Gupta called for caution while going ahead with such a move, including its timing and applicability.

"...we don't want this to be another 'forced sale', even though this offers a good opportunity for institutional capital and funds," he said.

Thunuguntla said Sebi needs to give sufficient time to meet this requirement so as not to flood the markets with promoter stake sales.

Chande said even though the country has been a promoter-driven market historically, such a move has advantages like wider ownership through institutional investors, more market depth, better price discovery and hopefully will enhance the corporate governance standards.

Centrum said the top three companies which will see the maximum quantum of sale will be TCS (Rs 59,600 crore), Wipro (Rs 15,000 crore) and D-mart (Rs 14,000 crore).

Presenting her maiden budget, finance minister Nirmala Sitharaman said, "it is right time to consider increasing the minimum public shareholding. I have asked Sebi to consider raising the current threshold from 25 to 35 percent.