Promoter cuts to spur activity in MNC stocks

Written by Press Trust of India | New Delhi | Updated: Nov 26 2012, 05:57am hrs
Shares of multi-national companies (MNCs) will be in focus in the next few weeks as many of them will be required to either reduce promoter shareholding to a regulatory cap of 75% or get delisted.

At least four companies Fresenius Kabi Oncology, Disa India, Blue Dart and Xchanging Solutions have already sold promoter shares through one-day offer-for-sale (OFS) window in recent weeks, while a few others, like Honeywell Auto, are lining up their share sales in due course.

Under the OFS route, promoters can offload shares to any investor through a special window allowed by the exchanges for a day.

Market analysts believes that more MNCs may opt for the OFS route to comply with Sebis norm as delisting is not a feasible option because of the huge cost involved.

These MNCs have only two option. Either comply with Sebis directive by reducing promoters holding or get delisted. I think delisting is not a viable option because of the huge cost burden as many of the stocks have run-up in anticipation of delisting offers a huge premiums, Destimoney Securities MD and CEO Sudip Bandhopadhyay said.

Sebis deadline is approaching and in that scenario the OFS mechanism is the quickest way to reduce promoter holding. I am expecting that in the next two months, many companies will go for OFS route to shore-up non-promoter holding, he said.

He further added that in due course, some correction in these share prices would be noticed. The shares would not crash because these are fundamentally sound companies but definitely the prices would go down, he said.

The proposed OFS by these companies has dashed hopes of investors, who had tanked up shares of MNCs in expectations of delisting offers at considerable premiums after expiry of Sebis June 2013 deadline.

Barring two companies, Thomas Cook and Singer, shares of the Indian subsidiaries of foreign multinational firms have fallen in the range of 1-18% in the last two months against the Sensex, which has dipped by a little over 1% during the period.

Individually, Astrazeneca Pharma dived by (18.43%), followed by Fairfield Atlas (17.75%), Sharp India (13.3%), 3M India (8.75%) and Oracle Financial Services (6%).

Novartis, Gillette, BOC India, Elantas Beck India and Timken India too dropped on the bourses.

Earlier this year, share prices of many MNCs hd spurted sharply in anticipation that many of their promoters may delist them.

The foreign parents of three companies Fresenius Kabi Oncology, Xchanging Solutions and Disa India have diluted their holding in the last two months to the required 75% using the OFS route. Last week, Global logistics services provider DHL Express (Singapore) sold around 6% stake in Blue Dart Express.