The requirement to meet 35 percent would result in companies needing to offer approximately Rs 1 lakh crore to the public
Finance Minister Nirmala Sitharaman proposed to increase the public shareholding from the current 25 percent to 35 percent.
The step is likely to increase the liquidity in the stock market and help in reducing manipulation, and unlock approximately 10 percent of blocked equity.
“Budget proposes to increase the public shareholding from 25 percent to 35 percent. This forces many companies to dilute stake in the market by another 10 percent. All MNCs and IT companies generally will have to meet the requirement,” George Heber Joseph, CEO & CIO - ITI Asset Management Ltd.
There are more than 700 firms as per March quarter disclosure data on the BSE that have promoter holding of more than 65 percent including TCS, HUL, Wipro, Bharti Airtel, Coal India, HDFC Life, Vodafone Idea, DLF, ABB India and Avenue Supermarts, among others.
Table: Top 20 companies on the basis of quantum of sale in which promoters may have to offload stocks if the proposed regulation kicks in.
"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. The requirement to meet 35 percent would result in companies needing to offer approximately Rs 1 lakh crore to the public," said Rajiv Singh, CEO, Karvy Stock Broking.
"The proposal to increase from 25 percent to 35 percent is good for the market perspective. Stock floating and volume may increase many listed PSUs stocks floating will increase," Sanjeev Jain, VP Equity Research, Sunness Capital India told Moneycontrol.
“If share float will increase then automatically trading volume will increase benefitting the overall health of the market. For promoter who hold the stocks for the long term would mean at least 10 percent blocked equity will be available in the market for trade,” he said.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.