115 cos still to meet holding norm Promoters Of These Firms Need To Offload 26K Cr Shares By June ’13

Mumbai: There may be still some time for companies to comply with Sebi's minimum public shareholding norms, but data shows that only a handful of firms have met the rules, with most tapping the Offer-for-Sale (OFS) route. While Wipro took the restructuring path, Godrej Properties opted for the Institutional Placement Programme (IPP) and Westlife Development, parent of McDonald's south and west India franchisee, is in the process of issuing bonus shares to non-promoting shareholders that would aid in complying with the 25% minimum public shareholding requisites. 
    There are some 115 companies where promoters are yet to pare their shareholding to 75% level, reveals New Delhi-based brokerage SMC Capital. Promoters of these companies will have to offload shares worth Rs 26,158 crore, according to current valuations. The rules have to be adhered to by June 2013, failing which action will be taken against the promoters by the market regulator. 
    In the last few months, Honeywell Automation, Blue Dart, JP Power, DB Corp, Reliance Power, Eros International, Hindustan Copper, ONGC and NMDC have taken the popular OFS route, while Adani Enterprises have announced OFS plans to increase public float. 
    So far, only the large companies have taken the OFS route, and this may not be the case for smaller companies, which may be forced to take the IPP route or other options, said Amitabh Malhotra, MD, Rothschild India, a UK-headquartered M&A advisory firm. "OFS is restricted to the top 100 companies based on average market cap of the previous quarter. Hence this method wouldn't be available for most of the companies, particularly small and mid cap companies," Malhotra said. 
    While private-sector firms have another six months to meet the deadline, state-owned units have more breathing time, which is August 2013. And unlike private sector firms, PSUs have to meet only 10% public shareholding level. 
    Some of the other options that companies could look at includes Follow-on Public Offer (FPO), rights issue and bonus shares. In case of rights and bonus issues, promoters have to let go of their entitlement. Market analysts argue that FPO makes sense for large issuances, while there are some who say a bonus issue scores over other methods as it is not dependent on market conditions. And a rights issue could be the preferred option for a company that requires capital, and since there is pricing flexibility, it becomes all the more attractive for non-promoting shareholders. 
    Sources said that a good number of companies have conveyed to Sebi that they would meet the changed shareholding norms. If companies fail to meet the June 30, 2013 deadline, then the possible legal consequences could be compulsory delisting, ban on promoters and companies from accessing the capital market and moving stocks to the trade-for-trade segment, which automatically bars day-trading in the counter. 
    Apart from the already listed ones, companies that have tapped the capital market for the first time, for instance, Bharti Infratel, will get three years from the time it gets listed to meet the new public shareholding norms.