As many as 15 of India’s largest companies belonging to the BSE 100 —including Wipro, DLF and NTPC — will have to dilute their shareholding in order to take their public holding to a minimum of 25 per cent as the government amended the Securities Contracts (Regulation) Rules on Friday. Accordingly, listed companies having less than 25 per cent public holding will have to reach that level through an annual addition of not less than 5 per cent to public.
As a result, there nine government owned companies and six private companies in the BSE 100 will have to come out with follow on public offerings, offers for sale or institutional sales to dilute their promoter’s stake. If they do so they will have to raise Rs 114,000 crore today.
All told, there are 230 companies out of the 3,634 companies (that are listed at the Bombay Stock Exchange and disclosed their shareholding pattern as on March 31, 2010) that have their public holding below 25 per cent threshold.
Experts say, this is a move in the right direction and will bring more depth to the market. “It will bring more liquidity, depth and efficient price discovery mechanism in the market,” said Aseem Dhru, chief executive officer, HDFC Securities.
While public sector units (PSUs) can look for follow on public offerings private companies may adopt other routes. “The private sector companies may go for secondary block or may raise it through qualified institutional buyers,” said Dilip Kadambi, managing director, RBS Investment Banking.
This will give the government’s disinvestment programme a shot in the arm. “Now that it is a law, all public sector companies that fall below this level will see disinvestment happen as they have no option but to do it and in the process will also raise the disinvestments proceed for the government,” said a market expert on conditions of anonymity.
The amendment says that existing listed companies will have to reach that level of 25 per cent of public holding by an annual addition of not less than 5 per cent.
However, new listings with post-issue capital of more than Rs 4,000 crore may be allowed to go public with 10 per cent public shareholding and comply with the 25 per cent norm through an annual addition of 5 per cent in public holding.