25-per cent public holding may lead to delisting of Indian subsidiaries of MNCs

Shares of Indian units of multinational companies (MNCs) were up yesterday on expectations that their foreign parents would ratherde-list than dilute their holding.

Stocks of a number of entities like Fairfield Atlas, Ineos Abs, AstraZeneca Pharma, BOC India, Gillette India, Oracle Financial Services, Alfa Laval, Novartis India and Fresenius Kabi surged 6 per cent -15 per cent in a weak Mumbai market even as the benchmark Sensex fell about 2 per cent to close at 16,781 yesterday in the backdrop of weak global markets.

Foreign promoters of all the above companies hold more than 75-per cent stake. Analysts exdpect many such companies would get de-listed from the stock exchanges with the new government norms taking effect as their foreign promoters would not like to dilute their holding.

On Friday the government made it mandatory for listed companies to have a minimum public holding of 25 per cent (See: Listed companies required to maintain 25 per cent public holding). 

According to analysts this would involve raising $600 million to comply with the new norms.
They say most MNCs in pharma and FMCG space would go for de-listing.

Indian units of several MNCs including Reckitt Benckiser India, Philips Electronics India and Cadbury India, have posted impressive numbers after de-listing with investors reaping a bonanza.

There are at least 22 MNCs which have public shareholding of less than 25 per cent, a norm that the government stipulated on Friday for all companies that wish to remain listed.

Companies with public holding less than 25 per cent, will now have to compulsorily go for at least 5 per cent dilution of promoters' stake dilution every year till they reach the 25 per cent limit. According to analysts though the alternative is not spelt out by the government's amendment to the rule, it is to go for delisting.