Minimum shareholding rule: Market to see $2bn worth paper

As the Sebi deadline for the 25-percent minimum-public-float norm nears, India Inc is working overtime to dilute promoter stake using the OFS or IPP route. Market watchers say shares worth nearly USD 2 billion is likely to hit the market in the next two-to-3 weeks. CNBC-TV18’s Nimesh Shah and Ashmit Kumar report that this could be an overhang on the markets for the next few months.

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As corporate India gears up to sell down to meet SEBI's public float norms the market will be hit by a rush of paper pegged at USD 1.8 billion by June 3 and USD 2.5 billion by August 2013. This could be a near-term headwind for Dalal Street and put the brakes on the current rally with liquidity being sucked out.
S Subramanian, MD - investment banking, Axis Capital, says "Saying that it is in two weeks and it is going to be a big amount, could be a major announcement and a worry for investors. However, recent history has shown inflows of USD 4 billion. The inflows in February were somewhat similar. In 2010, from the month of September to November, the markets saw inflows of nearly about USD 20 billion, out of the overall inflows of USD 29 billion in 2010."
The situation could worsen once the government decides to get moving on its divestment plans to mop up Rs 40,000 crore. Sources told CNBC-TV18 that the government has moved a Cabinet note for 11.36-percent stake sale in NHPC via an OFS. The finance ministry has also moved a Cabinet note to divest stake in Indian Oil. ITDC, MMTC, STC, NFL are also likely to hit the markets shortly. There are nearly 48 private companies with more than 75-percent promoter holding yet to meet the free-float norms. Companies like Oracle Financial Services, Bajaj Corp and Omaxe, are already in the process of offloading promoter shares via the OFS route.