Over 50 firms miss public shareholding deadline

Of the 8 companies that filed for dilution of stake through OFS route on Monday, Essar Ports, Omaxe and BGR Energy Systems fail to do so

The last day for meeting a regulatory deadline on minimum public sharehlolding saw three companies failing to sell the requisite number of shares. The three firms that failed to garner investor response are Essar Ports, Omaxe, and BGR Energy Systems. For Essar Ports and Omaxe, this was the second attempt at offer for sale (OFS).

The last day for compliance with the norms was Monday, June 3. Eight companies filed for dilution of the stake through OFS to raise Rs 454 crore. However, only five of them sailed through, pegging the share-sales for Monday at about Rs 200 crore.

Tata Communications, Rama Phosphates, Marathwada Refractories, Lords Chloro Alkali, and Kartik Investment Trusts managed to garner full subscription.

According to analysts, roughly four dozen companies are yet to meet the minimum public shareholding norms with the deadline passing by them today.

In August 2010, the Securities and Exchange Board of India (Sebi) had asked companies to ensure minimum public shareholding at 25 per cent. Companies had been given three years' time for fulfiling these norms, after which, those yet to meet the norms were to be penalised.

Industry players believe the companies would be held responsible for non-compliance. According to them, the regulator could look at monetary fine or other penalties. Sebi chairman U K Sinha has suggested that penalties will look to spare hardship for minority shareholders and have some consideration for companies who made an effort to meet shareholding guidelines.

Those who haven't may face the music.

"If companies have not tried, then the regulator is going to be strict. For those who have tried, the regulator may give some more time and look at special dispension on a case-to-case basis," said the head of investment banking of an Indian brokerage firm.

Some quarters believe that companies may not be given extra time to meet the norms as the regulator has been vocal about its refusal to extend deadlines. Others believe that both a penalty and extension is what is needed for the regulator to look serious.

"Companies may have had challenges meeting the deadlie. But those that complied with it may perceive any blanket extension as unfair," said George Mathew, Head of Investment Banking at Espirito Santo.

P R Ramesh, Senior Consultant with Economics Law Practice said that the penalty would be applicable to the independent directors and promoters and not the company in itself.