MARKET UPDATE
| Promoters to shell out more shares to meet shareholding norms Tue, 09 Oct 2012 10:10:00 +0530 |
| Business Standard Economy Policy News Promoters of large companies such as Wipro will have to shell out more stake in order to comply with the minimum public shareholding norms. According to Securities Contracts (Regulation) Rules, 1957 (SCRR), private sector firms are required to have at least 25% of their shares held by the public. In its recent board meeting Sebi decided that, “Capital issued outside India is neither included in the numerator nor in the denominator,” while calculating the public shareholding. This means the capital issued outside India in the form of American depository receipts (ADRs) and Global Depository receipts (ADRs) will not be considered while calculating the public shareholding in a company, even though these receipts are held by public. Sebi said, “for the purpose of compliance with rule 19A of SCRR, public shareholding would be computed as “shares held by public” as a percentage of “total number of shares held by promoters, promoter group and public” i.e. B/A+B (where, A = Promoter/promoter group shareholding, B = Public shareholding).” In the Sebi reporting format, ‘A’ refers to “Total shareholding of Promoter and Promoter Group” whereas ‘B’ refers to public shareholding by individuals, institutions, corporate bodies etc. ‘C’ which refers to “Shares held by Custodians and against which Depository Receipts have been issued” under the format has been totally excluded from the calculation. This will mean promoters have to sell more shares. For example in the case of Wipro, 42 million shares or 1.71% are held by custodians against the ADRs. Including these, the total outstanding shares of the company works out to 2.46 billion. Promoter group holding of 1.92 billion shares comes to 78.37%, meaning they have to sell 3.37% or 82.9 million shares. However, under the new Sebi calculation where in the ADRs are exempted from both total shareholding and public shareholding, the promoter shareholding of 1.92 billion shares amounts to 79.73% of the reduced total shares of 2.37 billion. Therefore promoters will have to sell 4.73% or 149.34 million shares. This means Wipro promoters have to sell a little over 66 million shares. At today’s prices that comes to around a divestment of an additional Rs 2,400 crore. Wipro shares were trading with losses of 0.55% at Rs 363.65 at 9.57 am. |
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