With the deadline for complying with the minimum public shareholding norms just one trading session away, nearly 40 companies are yet to reduce their promoter holdings to the stipulated 75%. The value of share sales by such companies is likely to be around R5,000 crore.
Interestingly, a number of companies may end up on the non-compliant list even as the current month saw a sudden rush of listed entities launching their offers for sale (OFS) to take their public shareholding to 25%, as mandated by the Securities and Exchange Board of India (Sebi). However, the list of non-compliant companies mostly comprises of mid-cap and small-cap companies.
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While it is still not known what action the capital market regulator intends to take against companies that do not make the public shareholding cut, Sebi has made it clear that there will be no extension of the deadline. There have been reports that Sebi might cap the promoter voting rights at 75% in the case of all non-compliant entities. Companies could also approach the regulator for an extension due to exceptional circumstances but it remains unclear whether Sebi would accede to such requests or whether Sebi chairman UK Sinha would stand firm.
In May, 30 companies launched their OFS issues that were collectively worth nearly R3,900 crore. The rush picked up in the last five trading sessions which saw 21 entities launch their OFS.
The deadline for compliance with the minimum public shareholding norms expires on Monday for all private sector entities. Government-owned companies have time until August to bring down the promoter holding to 90%. There are currently around 12 listed PSUs where the government holds over 90% and a stake sale in such companies is likely to be worth around R3,800 crore.
Meanwhile, Friday saw four entities ? Sharda Motor, Fomento Resorts & Hotels, ELCID Investments and Modern India ? launch their OFS and getting fully subscribed. State Bank of Mysore, meanwhile, launched an institutional placement programme, an avenue allowed by Sebi to comply with the shareholding norms.
On Thursday, nine companies had launched their OFS, collectively worth nearly Rs 870 crore. However, three issues ? including those of Jet Airways and Tata Teleservices (Maharashtra) ? remained undersubscribed.
While there have been nearly 70 private and public sector OFS issues since January 2012, less than 10 have failed to be fully subscribed.
According to merchant bankers, the bulk of the bidding in private sector OFS has been by foreign institutional investors, while their domestic counterparts have been more active in government offerings. Incidentally, SAIL, Hindustan Copper, RCF and Nalco saw Life Insurance Corporation (LIC) putting in large bids.
Collectively, promoters have managed to raise over Rs 45,300 crore or $8 billion through the offer for sale route since January 2012 when the OFS mechanism was first announced. Of this, the government’s share is pegged at over Rs 36,000 crore, while the promoters of private sector entities raised more than Rs 9,200 crore.