In a step towards complying with the new shareholding norms on promoter holdings, the Azim Premji Foundation said it would sell 35 million shares of Wipro through an auction route, opening on Wednesday.
At the current price, this should raise Rs 1,530 crore (Rs 15.3 billion). The promoter holding in Wipro, now 79.5 per cent, would reduce to 78.1 per cent. The funds are to be used for expansion of the Foundation's work.
"There are 40 firms in the private sector that need to bring down promoter holding to 75 per cent by June 3, 2013, and I think this mechanism will be preferred. The auction route is easier as well. In an IPP (Institutional Placement Programme), the company needs to file a prospectus with the regulatory authorities and it is restricted to institutional players. Whereas, in an auction, the sale can have participation from retail investors, HNIs (wealthy individuals), etc," said Jagannadham Thunuguntla, head of research, SMC Global Securities.
D B Corp is another company that has announced its intention to use the procedure for 'offer for sale by promoters through the stock
exchange mechanism' to bring down the promoter holding. It has not disclosed the date for this. The Premji Foundation did not disclose the floor price for the sale.
"The regulatory authority has provided for two routes -- IPP and auction. While ONGC (Oil and Natural Gas Corp) priced its share at a 4.7 per cent premium, in the case of Wipro it could be at a discount," said an equity analyst of a leading brokerage firm.
The Foundation said it was selling the shares for its expansion. "(We) continue to rapidly scale up activities. To support this, (we) propose to sell up to 35 million shares of Wipro, following the Offer For Sale process prescribed by Sebi (the markets regulator)," it stated.
In December 2010, Premji had transferred 213 million shares or 8.7 per cent stake in the company to a trust as an endowment, to fund the development of the Azim Premji Foundation.
The latter is establishing district and state-level institutions focused on capacity building in the education and development sector, and running other education-related programs. In five years, the Foundation aims to scale up from 10 district and state-level institutions to about 60 institutions, largely in the disadvantaged districts of the country.