Promoters may have to sell cheap to meet Sebi's June deadline
With just three months left for companies to adhere to Securities and Exchange Board of India\'s (SEBI) deadline of meeting the minimum public shareholding norms, many private companies are contemplating diluting their shares at a steep discount to market rate.
According to market players, investors are reluctant to participate in share sale auctions unless the company provides steep discount to market rates. As many as 30 private companies within the BSE 500 universe are yet to reduce their promoter shareholding to 75%.
Some of the notable names that make up this list are Wipro (78.29%), DLF (78.58%), Bombay Rayon (93.15%), Jet Airways (80%), Tata Communications (76.15%) and Fortis Healthcare (81.48%) among others. Multinational companies with more than 75% shareholding include Oracle Financial Services Software (80.31%), BOC India (89.84%), AstraZeneca Pharma (90%), and Novartis (76.42%).
Merchant bankers said investors may hammer the stock price once the seller announce their plans to sale the shares in open market. This could especially be the case with high-beta stocks and firms with poor financial track record and weak corporate governance.
"Companies have no choice but to offer their shares at a steep discount. Companies were given three years to comply with SEBI\'s norms. However, some of the companies were hoping that the markets would remain buoyant, while others were hoping that SEBI would extend the deadline,” said a senior official at a Mumbai-based investment banking firm, who preferred to remain anonymous.
Merchant bankers and analysts expressed concerns and stated that SEBI is not likely to extend the deadline. “We
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