Two weeks, five offers. With the June deadline for reaching the minimum public holding of 25 per cent looming, promoters are queuing up to offload shares through offers for sale on the stock exchange.
But they are having to price these sales at steep discounts to get retail investors interested.
In the past two months, promoters have raised Rs 970 crore through seven such offers. Most of them got fully subscribed, but only they were offered at a discount to the prevailing market price. Discounts, where substantial, have had a telling effect on the market price of the stock.
Around 105 companies are yet to meet the minimum public shareholding norms. They need to offload Rs 23,000 crore worth of shares over the next three months.
Discount pricing
Most of these companies disclosed the floor price for the offer — or the minimum price at which the shares would be sold — a day ahead of the sale.
The steep discounts offered led to prices of these stocks dropping. This has left investors in these offers disappointed.
For instance, Kennametal India set its floor price 18 per cent below the prevailing market price for its offer last week. The stock has lost 16 per cent in the past two weeks.
Similarly, Elantas Beck’s floor price, at a 22 per cent discount led to the stock dropping 11 per cent on the day of the offer. Nor has the stock recovered since, languishing 25 per cent below pre-offer prices.
The list of private companies which are yet to reduce promoter stakes to the mandated 75 per cent features sectors such as realty, textiles, chemicals and hotels.
At current prices, if promoters use the offer-for-sale route to bring down holdings, it will add around five percentage points to the free-float market capitalisation of these companies.
With the maximum promoter limit for government companies set higher at 90 per cent, only 13 of these have to come up with offers to dilute stake.
The offers for sale from government-owned companies also have support from public sector institutions such as the Life Insurance Corporation.
However, whether other investors will oblige by lapping up shares in private sector companies is questionable.
Almost a third of the companies on this list are tiny, with a market capitalisation of less than Rs 100 crore.