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Promoters' shareholding decreasing in non-family firms, rising in family firms: Study

Press Trust of India  |  New Delhi 

Promoters' stake in non-family run firms is on the decline, while in case of family firms it is on an uptrend requiring a close vigil on their practices, says a study.

According to the study by (ISB), promoters of family firms have increased their stake in their companies over the last decade, while State owned Enterprises (SOEs), Other Business Group Firms (OBGFs) and Standalone Non-family Firms (NFs) have witnessed a decline in promoter shareholding.

The study by analysed the trends in equity ownership by various classes of shareholders for 4,615 firms listed on the NSE and the BSE, across different ownership categories, from 2001-2017.

The research was conducted by Nupur Pavan Bang, and of ISB, and Sougata Ray of

"The ownership pattern of listed businesses in is fairly concentrated, especially in the case of family firms, and While this has significant positive effects, there is also a need to keep close vigil on their practices," said Ramachandran.

According to Bang, "it seems to imply that the engine of growth of Indian businesses will not be dependent on overseas or other promoter categories. Instead, promoters of family firms will continue to play a major role".

As per the study, in family business group firms (FBGFs), the preferred mode to hold shares is through holding companies, while in standalone family firms (SFFs) the family members prefer to hold shares directly as individuals or Hindu Undivided Family (HUF).

The study further noted that non-promoter institutional shareholding is lower in family firms as against non-family firms and it has decreased further between 2007 to 2017.

"Institutional investors have a strong preference for firms with good Thus, we see higher institutional shareholding in non-family firms and Other business group firms," the report said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, August 07 2018. 16:10 IST