Firms with over 75% promoter shareholding number over 70

Topics Sebi | shareholding

There were 78 listed companies which have promoter shareholding which is over the 75 per cent mark in the September quarter.

The Securities and Exchange Board of India requires listed companies to maintain no more than 75 per cent public shareholding. To be sure, they are given additional time in the event of new listings and because of other reasons such as being backed by the government. Government firms have an extended deadline to meet minimum public shareholding norms. The 78 firms under consideration have a cumulative loss of Rs 52790.1 crore during the last financial year ending in March 2019 (FY19). Of this, the 48 profit-making companies made Rs 20370.2 crore. Thirty of the 78 firms are loss-making. They made a total loss of Rs 73160.8 crore. Some of the rise in stake is due to promoters pumping in additional capital to loss-making companies. 

Three government-backed entities top the list of losses. IDBI Bank, Punjab National Bank and Allahabad Bank made losses between Rs 8,000 crore to nearly Rs 15,000 crore for FY19. 

Amit Khurana, head of equities at brokerage firm Dolat Capital Markets suggested that there has been little evidence of promoters looking to increase their stake except for some distressed firms. He believes that promoters in general may be willing to put in more money in companies after there is more evidence of a turnaround in the economy.

“If the economy bottoms out in the next few quarters...lot of promoters may say, ‘okay, let me raise my stake’,” he said.

Gross domestic product grew at 4.5 per cent in the September quarter showed data released on Friday. This was the slowest since 2013. Analyst commentary suggested that a return to higher growth may take some more time. Lack of demand, and a reluctance to make fresh investments amid idling existing capacity are said to be some reasons hindering a quick recovery.

Exceptions aside, the regulations can call for stringent action in case of non-compliance with minimum public shareholding. The regulator has proposed various strictures including fines and other restrictions over time.

“The recognized stock exchange shall intimate the depositories to freeze the entire shareholding of the promoter and promoter group in such listed entity till the date of compliance by such entity…. The promoters, promoter group and directors of the listed entity shall not hold any new position as director in any other listed entity till the date of compliance by such entity,” an October 2017 circular had said.

It increases the fine and actions against promoters if non-compliance is for a period of a year or more.

“The actions specified in this Circular are without prejudice to the power of Sebi to take action under the securities laws for violation of the MPS requirements,” it said.

Raising stake

  • Listed firms require minimum public shareholding
  • Promoters can't own more than 75%
  • Sebi rules allow for some exceptions, including for PSUs
  • Recently, promoters have pumped in capital into loss-making entities
  • Some companies have over 90% promoter stake 
  •  Of the 78 firms, 48 profit-making companies made over Rs 20K crore
  • Thirty of these 78 companies werein the red with a total loss of over Rs 73,000 crore

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