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Investors lap up new shares as promoters rush to sell stakes
Indian equity markets these days are flooded with offer for sale (OFS) options and what’s more, most of them are getting oversubscribed. That’s because the market regulator has set a deadline for promoters to cut their stakes to 75% by June 3 in firms where they hold higher stakes. Slimming down
Indian equity markets these days are flooded with offer for sale (OFS) options and what’s more, most of them are getting oversubscribed. That’s because the market regulator has set a deadline for promoters to cut their stakes to 75% by June 3 in firms where they hold higher stakes.
With not just large fund houses but even individual investors lapping up these shares, more money is flowing into the markets and into the companies’ kitties, said analysts. However, since most of these companies are not part of the 30-share BSE Sensex, the key stock indices are unlikely to get affected, they added.
The Securities and Exchange Board of India has given a June 3 deadline to companies for complying with the mandatory public holding of 25% and reducing promoter holding to 75%.
Among the firms going in for OFS are L&T Finance, Gillette India, Muthoot Finance,Bajaj Corp and Bharti Infratel.
Close on the heels of half a dozen companies raising R900 crore on Wednesday, nine companies raised R754 crore on Thursday (see graphic).
Though there are varying estimates regarding the amount of money to be raised by June 3, analyst estimates put it up to Rs 13,000 crore. “Our computations suggest that less than R5,000 crore needs to be raised by June 3,” said Sandeep Gupta, vice-president at Motilal Oswal Securities who manages equity advisory services.
Some other estimates put it at Rs 13,000 crore.
“Companies have been frantically selling their shares through offer for sale or institutional placement route,” said Gupta.
Of the 75 to 100 private promoter-led listed companies, around 50 have already taken the OFS route, said Dara Kalyaniwala, vice-president, investment banking, Prabhudas Liladhar.
“This has been a very good move and many of these issues have been well received by the market. This will bring liquidity to companies and expand market participation by the public.”
