<p>An 8,764% surge in the shares of a company with a minuscule public shareholding has prompted India’s regulator to consider changing its rules for firms emerging from the nation’s bankruptcy process.</p>.<p>The Securities & Exchange Board of India has sought comments on a proposal to cut the time given to companies that re-list after bankruptcy resolution to boost the free float to at least 10% within six months from 18 months currently. The rule mandating such companies to eventually get to the minimum shareholding of 25% within three years of re-listing remains.</p>.<p>“In one recent case it was observed that post insolvency resolution process, the public shareholding decreased to 0.97%, and showed 8,764% increase in its share price,” Sebi’s consultation paper said, listing Ruchi Soya Industries Ltd. and four other companies that re-listed between September 2018 and February.</p>.<p>Ruchi Soya was acquired by a Yoga guru Baba Ramdev’s Patanjali Ayurveda-led consortium last year via an insolvency resolution process. The founders held 99.03% of the company’s capital as of March 31.</p>.<p>The negligible free float saw Ruchi’s shares soar from about 17 rupees at the time of re-listing on Jan. 27 to 1,519 rupees on June 26. The price has since halved. Still, at its peak, the company was valued at $6 billion, ahead of bigger consumer-staples producers including Marico Industries Ltd. and Colgate-Palmolive India Ltd. The stock was down 3% to 699 rupees at 9:23 a.m. in Mumbai on Thursday.</p>.<p>“Such low public shareholding raises multiple concerns like a failure of the fair discovery of price of the scrip, need for increased surveillance measures etc. and may, therefore, pose as a red flag for future cases,” the regulator said.</p>.<p>A second option is to make it mandatory for such companies to have at least 5% public shareholding at the time of re-listing, Sebi said, adding that this threshold may not be significant to allay the concerns about illiquid stocks.</p>.<p>Market participants have until Sept. 18 to submit their views on the proposal.</p>.<p>Ruchi Soya swung to a profit of 122.6 million rupees ($1.6 million) in the quarter ended June, while its revenue dropped 5% from the preceding three-month period to 30.4 billion rupees.</p>
<p>An 8,764% surge in the shares of a company with a minuscule public shareholding has prompted India’s regulator to consider changing its rules for firms emerging from the nation’s bankruptcy process.</p>.<p>The Securities & Exchange Board of India has sought comments on a proposal to cut the time given to companies that re-list after bankruptcy resolution to boost the free float to at least 10% within six months from 18 months currently. The rule mandating such companies to eventually get to the minimum shareholding of 25% within three years of re-listing remains.</p>.<p>“In one recent case it was observed that post insolvency resolution process, the public shareholding decreased to 0.97%, and showed 8,764% increase in its share price,” Sebi’s consultation paper said, listing Ruchi Soya Industries Ltd. and four other companies that re-listed between September 2018 and February.</p>.<p>Ruchi Soya was acquired by a Yoga guru Baba Ramdev’s Patanjali Ayurveda-led consortium last year via an insolvency resolution process. The founders held 99.03% of the company’s capital as of March 31.</p>.<p>The negligible free float saw Ruchi’s shares soar from about 17 rupees at the time of re-listing on Jan. 27 to 1,519 rupees on June 26. The price has since halved. Still, at its peak, the company was valued at $6 billion, ahead of bigger consumer-staples producers including Marico Industries Ltd. and Colgate-Palmolive India Ltd. The stock was down 3% to 699 rupees at 9:23 a.m. in Mumbai on Thursday.</p>.<p>“Such low public shareholding raises multiple concerns like a failure of the fair discovery of price of the scrip, need for increased surveillance measures etc. and may, therefore, pose as a red flag for future cases,” the regulator said.</p>.<p>A second option is to make it mandatory for such companies to have at least 5% public shareholding at the time of re-listing, Sebi said, adding that this threshold may not be significant to allay the concerns about illiquid stocks.</p>.<p>Market participants have until Sept. 18 to submit their views on the proposal.</p>.<p>Ruchi Soya swung to a profit of 122.6 million rupees ($1.6 million) in the quarter ended June, while its revenue dropped 5% from the preceding three-month period to 30.4 billion rupees.</p>
