Capitalmind
Capitalmind
Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial
General

Minimum 25% Public Shareholding: Finmin

The Finance Ministry has announced its budget-promised amendment to the listing rules for all public companies.

The salient features of the amendment are as follows:

a) The minimum threshold level of public holding will be 25% for all listed companies.

b) Existing listed companies having less than 25% public holding have to reach the minimum 25% level by an annual addition of not less than 5% to public holding.

c) For new listing, if the post issue capital of the company calculated at offer price is more than Rs. 4000 crore, the company may be allowed to go public with 10% public shareholding and comply with the 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum.

d) For companies whose draft offer document is pending with Securities and Exchange Board of India on or before these amendments are required to comply with 25% public shareholding requirement by increasing its public shareholding by at least 5% per annum, irrespective of the amount of post issue capital of the company calculated at offer price.

e) A company may increase its public shareholding by less than 5% in a year if such increase brings its public shareholding to the level of 25% in that year.

f) The requirement for continuous listing will be the same as the conditions for initial listing.

g) Every listed company shall maintain public shareholding of at least 25%. If the public shareholding in a listed company falls below 25% at any time, such company shall bring the public shareholding to 25% within a maximum period of 12 months from the date of such fall.

(Emphasis mine)

People are saying this will be negative for the markets, but it will only hurt certain companies. The likes of DLF where promoters own more than 80% – and they only have to sell 5% every year. And the public sector giants like MMTC and NMDC where the government holds 90% or more; these stocks will and should fall, either now or when they actually decide to sell 5% at a time.

I need to do a detailed analysis on which shares get impacted the most. These are likely to be weak – but a better way to do the research is to see which stocks are the maximum hit on Monday morning, since someone else is bound to have done this research. I’m just being lazy.

I think I’ll test my coding skills by writing a tool to download shareholding patterns of all NSE companies and putting them into a database, then running a query across all companies to get this data. A few hours of work but will be so useful in future.

Note: “Public” shareholding is anything that is not owned by a “promoter group”. It includes FIIs, mutual funds, insurance companies and so on.

  • Anonymous says:

    >Hello Deepak,

    As I understand from the definition of public, is it not possible that the companies could make QIB placements to comply with the rules? In that case, the share price probably wont fall as much as a direct sell to the public

    Regards,
    A

  • Raja says:

    >Hi Deepak,

    Regarding the last part "I think I’ll test my coding skills … data".

    I suggest, may be you can try using this small tool called Interactive Analysis from SAP. It's free for 90 days. You can download the software here. http://www.sdn.sap.com/irj/boc/iade

    It's basically a BI tool where you can analyze data (even from a website – if the data is exposed as a wsdl by the website).

    If you give me the right link on NSE for the data that you have in mind. I can try to do this and share the results with you

    Regards
    Raja

  • Deepak Shenoy says:

    >Raja: I don't particularly fancy a 400 MB download and then the corresponding load on my machine 🙂 But if you want to get it going, here's how – get shareholding pattern from links like : http://www.nseindia.com/marketinfo/companyinfo/eod/shareholding.jsp?symbol=RELIANCE and then traverse the results to get info.

  • Mansukh. M says:

    >Please take a look at this list… i think this shud suffice…
    http://www.moneycontrol.com/news_html_files/news_attachment/2010/Public%20Shareholding.pdf

    **Of the PSUs, the prominent companeis who will need to come out with stake sale are Hindustan Copper, MMTC, Neyveli Lignite, NMDC, Engineers India, PFC,
    SJVN, MRPL, NTPC, NHPC, SAIL, Power Grid, United Bank, IOC, Bharat Electronics, etc.

    **In the private sector, the prominent companies who will need to come out stake sale are DLF, Wipro, Reliance Power, Blue Dart, Omaxe, Gokaldas Exports,
    Godrej Properties, Jaypee Infratech, Mundra Port, Jet Airways, Sun TV, JSW Energy, Fortis Healthcare, Tata communications, IL&FS Transportation.

  • @shwind says:

    >Hello Deepak,

    Regarding "I think I’ll test my coding skills by writing a tool to download shareholding patterns of all NSE companies and putting them into a database, then running a query across all companies to get this data.", Are you aware if the NSE/BSE expose a API to fetch this data? Or do you simply plan to trawl the web pages for the info.

  • Anonymous says:

    >Off the topic:
    G-20 had heated debate on withdrawal of stimulus with Europe relegating the same for balancing the budget due to market fears.
    India wants calibrated withdrawal of stimulus.
    So the perceived growth of last one year seems to be in vain with this deep division.

    Seems not a good news for Markets. Think Indian market will go south in coming days/months.

    MK

  • Sarika Nayak says:

    >Dear Deepak, i have just read your article about 25 % minimum shareholding of public.

    I believe it will dilute corporate holdings and prices of stocks may fall due to this as corporates need to shed their holding. What do you feel? Like to listen your views.

  • Px says:

    >What about the mncs that will want to delist ?

  • Harikrishna R says:

    >Monday came and went and no clear signposts there, I guess.

    One interesting counter argument I heard on this topic today (arguing that this is a good thing for bigger Cos. that need to dilute) goes as follow: as the public holding goes up, so will the float and hence the weightage in indices, and this will cause index funds, esp. FII index funds, to buy these stocks. Smacks of circularity, I know, but this sort of buying does constitute a semi-guaranteed source of demand for the big guys. The smaller guys are likely to be hit, but there's really no way to short them.

  • Arghya says:

    >Hi Deepak,

    I don’t think it would be difficult for you to get data from BSE/NSE website. I myself used to pull up data from BSE/NSE website (left the program to runs for the night on my office server :P). And I think it is better to develop own tools rather than depending on any 3rd party software simply because nothing in this world is free (either there would be some evaluation version or just don’t match our own criteria)

    But does the effort worth enough? I made program to get data also program to analyze it. Initially my intention was to observer the change in shareholding pattern to come up with trading decision. Once I populated the database and started analyzing I realized it’s completely useless. At this point I can at best get data as of 31st March which is quite OLD data and any decision I make out from it just INVALID. So I stopped further work. (I also tried to follow the same approach for MF holdings. But same roadblock, not able to find a source which give more recent than one month old….). And I really don’t trust those numbers. I had run some analysis on historical data I got from BSE/NSE, they are inconsistent. They could easily win the argument by typo-error or error from company filling….. So basically I have stopped all such data-pull-up and analysis stuffs as it seems to me is just worthless in Indian market.

    I don’t know whether you have access to Bloomberg or CIQ. You can easily pull up most recent and ACCURATE (I think CIQ used to crosscheck and verify the validity of all numbers) data very easily. I would recommend using CIQ in this regard.

    If you could find any source for daily changes in MF-holdings or Shareholding, please let me know. Thanks in advance 🙂