Union Budget has issued directive on Maximum Promoter Holding to be reduced to 65%.
What could be the SEBI’s take on it’s implementation ?
Could this lead to double digit CMP reduction in Small Cap stocks
How to manage this change in personal portfolio?
regards,
Kartik
Secretary, Department of Economic affairs said in an interview No decision YET on minimum 35% public shareholding for listed companies.
This is the clrification from DEA Secretary FM has asked SEBI to EXAMINE public shareholding from 25 to 35%. He used the word asked to EXAMINE. So SEBI has to EXAMINE and then to take decision.
https://twitter.com/CNBCTV18News/status/1147110205060030466
Currently, there are 1,101 companies on BSE, which enjoy promoter holding of more than 65%, data sourced from Capitaline showed. The market value of stocks which may need to be diluted amounted to Rs 3.96 lakh crore or 8.9% as of Friday’s close.
As many as 167 companies from the BSE500 universe would be asked to dilute founder’s stake, if the proposal gets through. The broader BSE 500 index, which represents nearly 93% of the nation’s market capitalisation, covers all 20 major industries of the economy
Would some one explain what is the advantages govt seeing by this change. ? I can understand if Govt reduces Promoter holding of companies where GoI is the promoter. What difference Govt expects to see when this is done for all companies ? Is it more liquidity in system and more FII investment to fill the 10% max difference? Having more skin in the game for promoter considered as a good thing by small retail investers like us right?
weather SEBI finally accepts govt’s suggestion or not, the news is quite sure to correct the relevant stock prices and i see it as an opportunity to buy, especially where valuations have been expensive.
Dmart and TCS is what i am eyeing for now.
From Modi 1.0 to Modi 2.0, the view of the government has largely been that of taxing the stock market investors presumably because of good returns that this investor community makes.
my guess is that govt wants to :
A high level picture of company position on this proposal. Forcefully diluting promoter stake may have adverse effect on market.
If this leads to any kind of forced selling it will be a perfect opportunity to buy wonderful companies at fair prices. I’m definitely going to be on the lookout to grab some opportunities.
Rather than dump shares some cos might do a rights offering and promoters will not participate. This might be a great idea especially for companies with high debt.
More free float will likely increase weightage in global indices leading to more FII/FPI holding.
Most MNCs might actually not delist as they are astronomically high priced already (or will soon be on the first whiff of delisting). For the parent co to justify this cash allocation in an open offer will be tough.
The perceived advantages are:
I guess if this is rolled out over a period of time in a phased manner would have a tremendous positive impact on our market.
AJ
In my opinion govt. will get huge tax about 9000 crores.
Companies will be forced to reduce their stakes and when they make offer for sale to public and or to mutual funds will have to incur long term capital gain tax liability.
In smallcaps, higher is the promoter holding better is stock as it prevents price manipulations by spurious elements.
Government needs to avoid adhocism in approach. A stable regulatory environment is a must for healthy capital market as all stake holders want to plan the game. Frequent tinkering and changes in goalposts leads to unstable capital markets and economy. These need to be avoided completely irrespective of motivation.
Anyway, last 3 years have been very traumatic for market due to frequent disruption like demonitisation, rough GST roll out, LTCG, mutual fund classification regij, FPI casualty by super rich tax. Auto sector is under perpetual shocks (Euro 4, axle norm increase, Euro 6, shutdown of ICE industry for EVs etc).
Any chance should be well thought of, it should be thrown into public domain for wide debate and discussions and certainly not one fine day you nudge promoters to sell 10% stake!!
There was a WA message (not sure of authenticity) that the FM was proposing it to SEBI and SEBI has to make a decision on this front, set a time limit, and then approve it for the Promoters to start selling, and before a particular date it has to be done. NONE of this has happened, and hence the stocks over 65% are not selling otherwise, it would have crashed the markets (particularly the 1000+ stocks) that has to deal with this mandate.
Hence, does anyone know for a fact, on the timing, the nature of this recommendation and the final date before which companies have to achieve the 65%, if this is even available.
KKP
FM said and I quote " It is right time to consider increasing minimum public shareholding in the listed companies. I have asked SEBI to consider raising the current threshold of 25% to 35%. "
So SEBI has to consider and examine the FM request. They will take time to study and make a recommendation. There are no time lines available at this point in time, as far as I know for implementation of the same.
All unlisted companies like LIC, HYUANDAI, LG, SAMSUNG and even AMAZON, FLIPKART and GOOGLE INDIA should have been asked for compulsory listing or else pay a higher corporate tax based on their turnover rather than profit.
This will bring more liquidity and improve investment culture and also tax revenue.
Not strictly true.
Also pump & dump can be done by malicious promoters also.
