1,174 listed cos need to off-load promoter stake to meet budget proposal norm

As many as 1,174 listed firms, including giants like TCS, Wipro and DMart, will have to off-load promoter stakes worth about Rs 3.87 lakh crore, following budget announcement that minimum public shareholding has to be increased to 35 per cent.

Presenting her maiden budget, Finance Minister Nirmala Sitharaman on Friday said steps need to be taken to bring capital markets closer to the people and proposed raising the threshold for minimum public shareholding from 25 per cent to 35 per cent.

Based on the latest shareholding data, a research by Centrum Broking Ltd shows that 1,174 listed companies have promoter shareholding above 65 per cent.

"To put in other words, 25 per cent of the entire universe of listed companies (4,700 companies) will have to go through off-loading promoter stakes to meet this requirement," it said in a report post the budget announcement.

At the current market prices, the total quantum of sale that needs to be done by these 1,174 companies works out to be about Rs 3,87,000 crore, it added.

"While we need to await Sebi regulations regarding how much time will be given to these companies to meet with this minimum public shareholding norms, the overhang of this requirement of off-loading of promoter shareholding can have significant impact on the markets and the specific stocks.

"The regulator needs to provide sufficient time to meet this requirement so as not to over-flood the markets with stake sales by promoters," Jagannadham Thunuguntla, Senior VP & Head of Research (Wealth), Centrum Broking Ltd said.

According to the report, the top three companies in terms of quantum of sale would be TCS (Rs 59,600 crore), Wipro (Rs 15,000 crore) and D-mart ( Rs 14,000 crore).

Other big names in the list are Coal India, IDBI Bank, HUL, Bank of India and Punjab National Bank, among others.

"The recommendation of increasing public participation from 25 per cent to 35 per cent, expect the float of several more companies to increase in the next 2 years, leading to several INs and OUTs of the Nifty which is currently based on free-float methodology. A lot of MNCs, insurance companies and consumer companies like DMart will stay in focus because of it," said Vinay Pandit, Head - Institutional Equities, IndiaNivesh Securities.

VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said, the proposal to raise public stake in listed companies is desirable but will face practical constraints in implementation in the case of some large-cap companies.

"The measures to increases public shareholding from 25 per cent to 35 per cent is the biggest wealth shifting announcement in the interest of ordinary men," said Jimeet Modi, Founder & CEO, Samco Securities.