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Revision in public holding to suck out market liquidity; MNCs that may consider delisting

MNCs, including Hindustan Unilever, which may need to pare 2-10% if the norm is implemented.

Updated: Jul 05, 2019, 01.42 PM IST
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Amar Ambani said many MNCs listed on Indian bourses may consider delisting.
NEW DELHI: FM Nirmala Sitharaman on Friday stirred up a hornet’s nest when she proposed to increase minimum public shareholding to 35 per cent from 25 per cent. Analysts said if the proposal is implemented it will not only suck out liquidity from the stock market, but also lead to many MNCs with high promoter stake consider delisting.

Data compiled from corporate database AceEquity suggests there are 14 constituents of Nifty MNC index, including Hindustan Unilever, which may need to pare 2-10 per cent if the norm is implemented.

3M India, ABB India, Glaxosmithkline Pharmaceuticals, Honeywell Automation India, Siemens, Whirlpool Of India and Kansai Nerolac Paints may need to pare stakes by 10 per cent each. If these 14 MNCs were to cut their stakes to 65 per cent today, the share sale may be worth over Rs 39,000 crore.

“Proposal to increase minimum public shareholding from 25 per cent to 35 per cent is a potential negative for MNC and companies with high promoter holding,” said Sanjeev Hota of Sharekhan.

Amar Ambani of YES Securities said many MNCs listed on Indian bourses may consider delisting, if increase public shareholding is implemented.
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“If increased public shareholding norm implemented, supply of paper in the market will increase. This will mean that money will be sucked out of secondary market and valuations will remain under check,” Ambani said.

Watch out for richly valued MNC stocks, whose valuations may come under check, if they have to part with their holdings, said KRChoksey Research said.

"A lot of MNCs, insurance companies and consumer companies like D-Mart will stay in focus because of it. The benchmark Sensex will become more BFSI and consumption-heavy unless sectoral caps are brought in. This will also offer greater float in the market for institutional participation," said Vinay Pandit, Head - Institutional Equities, IndiaNivesh Securities.

Sebi had earlier set a deadline for all listed companies to adhere to minimum shareholding norms in 2013. It was later decided that the PSUs should also maintain a minimum public shareholding of 25 per cent in line with corporate.

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