The promoters of large companies such as Wipro and Tata Communications will have to shell out more stake to comply with the public shareholding norms after the Sebi said capital issued outside India would not be accounted for in the calculation of "public shareholding".
According to the Securities Contracts (Regulation) Rules, 1957 (SCRR), private sector firms are required to have at least 25 per cent of their shares held by the public.
In its recent board meeting, the Sebi decided that "capital issued outside India is neither included in the numerator nor in the denominator" while calculating public shareholding.
It said for the purpose of compliance with rule 19A of SCRR, public shareholding would be computed as "shares held by public" as a percentage of "total number of shares held by promoters, promoter group and public" i.e. B/A + B (where, A = promoter/promoter group shareholding, B = public shareholding).
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SELL LOCALLY, SAYS SEBI | ||
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Promoters of Wipro and Tata Communications would have to sell more shares to meet June 2013 deadline Wipro would have to sell 4.73% stake, valued at Rs 5,480 cr at Tuesday's close Tata Communications would have to sell 5.83% stake, worth over Rs 380 cr Other companies that are to meet shareholding norms cannot look at ADR/GDR route | ||
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GAME-CHANGER | ||
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Wipro |
Tata |
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Promoter shares (mn) |
1,927.88 |
217.03 |
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% holding including ADRs |
78.37 |
76.15 |
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% holding excluding ADRs |
79.73 |
80.83 |
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Shares to be sold (in mn) |
149.34 |
15.64 |
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Price (Rs ) |
367.35 |
248.2 |
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Value (Rs crore) |
5,486.00 |
388.18 |
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Wipro shareholding as of June, Tata Comm as of Sept 12 | ||
In the Sebi reporting format, 'A' refers to "total shareholding of promoter and promoter group" whereas 'B' refers to public shareholding by individuals, institutions, corporate bodies, etc.
'C', which refers to "shares held by custodians and against which depository receipts have been issued" under the format, has been excluded from the calculation.
This means promoters will have to sell more shares. And, it means capital issued outside India in the form of American depository receipts (ADRs) and global depository receipts (GDRs) will not be considered while calculating the public shareholding in a company, though these receipts are held by the public.
That will affect the promoters of large companies such as Wipro and Tata Communications, whose promoter group shareholding exceeds 75 per cent. These companies will have to sell more shares to comply with the norms before June 2013.
In the case of Wipro, 42 million shares or 1.71 per cent are held by custodians against the ADRs. Including these, the total outstanding shares of the company work out to 2.46 billion.
The promoter group, comprising Azim Premji and 11 other entities, holds 1.92 billion shares or 78.37 per cent. If ADRs are included, the promoters would have to sell 3.37 per cent or 82.9 million shares.
Under the new Sebi calculation where in the ADRs are exempted from both total shareholding and public shareholding, the promoter shareholding of 1.92 billion shares amounts to 79.73 per cent of reduced shareholding.
Therefore, the promoters will have to sell 4.73 per cent or 149.34 million shares. At on Tuesday's close, that would be a divestment of around Rs 5,480 crore.
Thus, Azim Premji and the group entities would have to sell a little over 66 million shares more, leading to additional divestment of around Rs 2,400 crore.
Wipro shares gained 0.46 per cent on Tuesday to close at Rs 367.35. In March, a trust controlled by Premji sold shares worth Rs 750 crore through the offer for sale mechanism.
Similarly, Tata Communications' public shareholding, including ADRs, is 23.85 per cent. But under the new formula, the public holding comes to 19.17 per cent. This means it has to sell 5.83 per cent or 15.64 million shares. At on Tuesday's prices it has to sell around Rs 380 crore worth of shares.
Tata Communications fell 1.49 per cent to Rs 248.20 on Tuesday. The Government of India, listed as part of the promoter group, continues to hold 26.12 per cent in Tata Communications. Other promoter group shareholders are Tata Sons (14.22 per cent), Panatone FInvest (31.1 per cent) and Tata Power (4.71 per cent).
A Wipro spokesman said, "We are in the silent period ahead of the July-September results." An email seeking comments sent to Tata Communications did not elicit any response till the time of going to press.
