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Corporate India springs into action to pare promoter stakes

Aims for share-sale before US holiday season, 'fiscal cliff? kick in

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A slew of companies are rushing to sell their stakes over the next few weeks before the holiday season in Western countries start mid-December. Over half a dozen companies, including and Blue Dart, which will sell shares through the auction route, are looking to offload stakes, with some attempting to cut promoter stakes to comply with the regulator’s minimum public shareholding requirement.

Since October, six offers for sale (OFS) have hit the market, with the latest being multinational Disa India. is a new share-sale route introduced this year to help companies bring down promoter holding.

“Quite a few deals will hit in the market in the next few weeks. Most of these will look to close before December 15,” said V Jayasankar, executive director and head of equity capital market at Kotak Investment Banking.
 

OFS ISSUES SINCE OCTOBER
Company Date Amt raised
(Rs cr)
Disa India 20-Nov 143
DB Corp  9-Nov 245
Xchanging Solutions 23-Oct 77
Pioneer Distilleries 23-Oct 0.2
Fresenius Kabi 12-Oct 115
Adani Power 8-Oct 193
Hindustan Copper* 23-Nov 574**
Express* 23-Nov 246**
*Forthcoming; **Minimum issue size at floor price 
                                                                             Source: BSE

Companies and bankers are pushing to sell shares before December 15 because fund managers in Western countries do not work for two-to-three weeks on the eve of Christmas and New Year. Also, promoters are sceptical to wait as there is uncertainty on how the markets would behave after January 1, when the so-called ‘fiscal cliff’ in the US takes effect. The ‘fiscal cliff’ may result in higher taxes and spending cuts in that nation.

“There could be be a lot of uncertainty at the time of the Budget. Most companies don't want to take that risk. Therefore, there are only two windows available for companies –one is till December 15 and the other is after January 10 till the Budget,” said Kaustubh Kulkarni, managing director, investment banking, JP Morgan.

Currently, there are over 110 private companies who are yet to comply with the 25 per cent public shareholding requirement before June 2013.

Bankers said that promoters, who were reluctant earlier, are now willing to sale their stake as valuations are much better compared to last year levels. The benchmark BSE Sensex has risen nearly 20 per cent since the start of this year.

“From companies, point of view valuations levels are reasonably better than what they were at the beginning of the year as share prices have gone up. From an investor's perspective, they are slightly more willing to part with their money as the markets have done well,” said Kulkarni.

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