Brookfield-backed IndoStar Capital seeks time to meet minimum public shareholding norms

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IndoStar Capital Finance, a Mumbai-based non-banking finance company backed by Brookfield, has sought more time from the regulator to meet minimum public shareholding norms after missing a June 2021 deadline.

The company will action all options to reduce the promoter holdings in the next three to six months and these may include further capital infusion and a stake sale, people aware of the plans said.

Brookfield and co-promoter Everstone have approached the Securities and Exchange Board of India seeking additional time to comply with regulations requiring the public to hold at least 25 percent of the company’s equity, a person aware of the development told Moneycontrol.

IndoStar Capital’s three promoters together hold almost 93 percent of the company’s equity – Toronto-based alternative asset management company Brookfield (56.29 percent), IndoStar Capital (35.84 percent) and private equity firm Everstone Capital Partners II LlC (0.84 percent).

Companies must have a minimum public shareholding of 25 percent within 36 months of listing on the stock exchanges. IndoStar Capital Finance listed in May 2018.

SEBI, Brookfield and Everstone did not respond to queries on the matter emailed by Moneycontrol.

According to a person familiar with the matter, the minimum public shareholding deadline was missed because of a change in control of the company following Brookfield’s investment announced in 2019. Brookfield invested Rs 1,225 crore to acquire a 31 percent stake in the company in May last year.

“This change triggered the takeover code and Brookfield made an open offer for 26 percent of the shares, which was fully subscribed in May 2020, leaving the promoters with a higher-than-expected shareholding. The COVID-hit markets also reduced the ability of the promoters to sell a large chunk of their shareholding in time to meet Sebi’s norms on minimum public shareholding,” the person told Moneycontrol.

Companies that fail to comply with shareholding norms face punitive action by SEBI, including a penalty of Rs 10,000 per day and a freeze on the voting rights of the promoters that exceed 75 percent of the shareholding. In the past, Sebi has acted against Accel Frontline and Gillette India in this regard.

SEBI chairman Ajay Tyagi said last week that a higher level of public float helps in price discovery and enhances corporate governance in a company.