The stake held by promoters in Indian companies has been falling steadily and now stands at 52 per cent of the market value for the BSE-500 companies. This is just above the 51 per cent stake needed to push even ordinary decisions through at company meetings. Promoter stakes have dipped from 58 per cent levels in March 2009.
Why they sold
Promoters and promoter group entities have shed stake for several reasons.
For one, with interest rates rising and profit growth slowing, promoters in some debt-laden companies have been forced to pledge their shares and forfeit them or sell stake to others, to raise fresh funds.
The credit crunch has seen promoters of Punj Lloyd, Sobha Developers, and so on, selling their stakes and raising money from institutional investors in these three years.
Kingfisher Airlines is also a case in point. Its debt recast plan in 2011 forced lenders to convert loans into equity, reducing promoter holdings. The company has also converted convertible bonds into equity.
Divestment of government stake in public sector companies, too, has aided this trend.
Power Grid Corporation, Power Finance Corporation and Engineers India have seen the Union Government offload stakes. ONGC used the Institutional Placement Programme route recently to reduce promoter holding.
Norms on minimum public shareholding introduced by the Finance Ministry in 2010, which require private sector companies to lift their public holdings to 25 per cent, have also helped.
With the deadline set at June 2013, promoters of companies such as Wipro and Godrej Properties, that have higher stakes, have sold some shares.
If promoters were on a selling spree, FIIs continued to buy, even in a range-bound market. FII holding in BSE-500 companies has increased from 12.9 per cent in March-2009 to 17 per cent now.