The Securities and Exchange Board of India (Sebi) has made it mandatory for promoters of all listed companies to hold shares in the demat form only. Companies will have to comply with the new norms before the end of September.
According to data, promoters of 2,644, or nearly 50 per cent listed companies, still hold shares in physical form. Of these, promoters of around 650 companies hold their entire stake in physical form. Such companies where promoters’ holding is in physical form include Hindustan Unilever, BHEL and MTNL, among others.
According to shareholding pattern till quarter ended March 2011, companies where some shares are in physical form include Dabur, Reliance Industries, Reliance Infrastructure, Reliance Communication, Reliance Power, Gammon Infrastructure, Jaypee Infratec and Cairn India, among others.
The scrips of those companies that fail to comply with the new norms would be put under surveliance in the trade-to-trade segment. Under this, only delivery-based trading can be done and stock will be closely monitored by exchanges.
Sebi said the norms were introduced to “further promote dematerialisation of securities, encourage orderly development of the securities market and to improve transparency in the dealings of shares, including the pledge or use as collateral, by promoters”.
Market players say the move could bring in more transparency. Share demat was mainly introduced to curb the menace of duplication of shares and fraud entries. Also, duplicate entries of shares of some of the largest private sector companies were found by the regulator in the past before the demat regime was introduced in the domestic markets.
Ambareesh Baliga, chief operating officer, Way2Wealth, said: “Companies never bothered to convert their shares in the dematerialised form. Now, they will have to do it. However, it won’t have any impact from the business point of view. From the revenue perspective, there may be an increase for a month, as there are charges involved.”