'Budget to impact MNC's and PSU's'

By Rajiv Singh

The increase in public shareholding from 25% to 35% is a good step for the deepening of capital markets. It also means that many companies will need to increase their public shareholding, mostly by selling of promoting stake or additional equity issuance. The detail to watch out for is the time allowed to meet this new rile. This will mostly impact MNC’s and PSU’s. The latter will also help the government raise resources. Some MNC’s may choose to delist, which will result in an open offer from them. Overall, the additional supply of equity should keep a lid on valuations, but in the longer term should help in getting more retail money in equity markets.

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The requirement to meet 35% would result in companies needing to offer approximately Rs. 1 lakh crore to the public. At present, out of BSE 500 companies, 100 companies have promoter stake above 65%. Out of Nifty, five companies, Wipro, TCS, Coal India and Hindustan Unilever and Bharti Airtel have promoter holding in excess of 65 per cent. PSU’s are especially effected. There are 40 PSUs with public holding lower than 35 per cent.

The author is CEO at Karvy Stock Broking