Watch out! Shares worth Rs 35k cr to flood markets soon

Over the next few weeks until 4 June 2013, 121 companies will have to offload shares entailing Rs 35,230 crore in the markets in order to comply with the minimum public-share holding norms.

[caption id=“attachment_262889” align=“alignleft” width=“380” caption=“Currently, there are 11 state-run companies in which the government holds more than a 90 percent stake.”]  [/caption]

According to SMC Global Securities, there are about 11 public-sector companies and 110 private companies that have to reduce their stakes in accordance with Securities and Exchange Board of India norms, which are based on a finance ministry announcement that all private-listed companies should have a minimum public holding of 25 percent and public sector companies, 10 percent.

Currently, there are 11 state-run companies in which the government holds more than a 90 percent stake. These include companies like Hind Copper (9.59 percent), MMTC (9.33 percent) , HMT (8.88 percent), National Fertiliser (7.64 percent), Neyveli Lignite (3.56 percent), RCF (2.5 percent ), State Bank of Mysore (2.33 percent ). See table below

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In the private sector, there are 110 companies in which the promoter holds more than a 75 percent stake. In this case the value of stocks that need to be offloaded works out to Rs 24,250 crore.

Companies might choose to offload their stakes through a variety of measures – follow-on public offers, initial public offers, auctions or preferential allotments. So watch out for plenty of action on these fronts.

[caption id=“attachment_261949” align=“aligncenter” width=“564” caption=“Source: SMC Global Securities”]  [/caption]

The markets have been on a high this year on the back of robust foreign fund flows, although in the past few days, worries over the General Anti-Avoidance Rules (GAAR) prompted investors to pull out more than Rs 1,500 crore from the capital (equity and bonds) markets.

It remains to be seen whether the markets remain buoyant in the next few months- if they don’t, they will create problems for companies that will be forced to offload their excess stakes soon.