India Sets Wider Shareholding Guidelines

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
07 Jun, 2010
New York City

Stocks in Mumbai trading dropped 2% in a volatile trading after markets in Asia closed lower on a weaker than expected U.S. jobs report. Private sector added virtually no new net jobs in the previous month.

[R]5:00 PM Mumbai, 8:30 AM New York – Mumbai stocks and market indexes dropped sharply after markets in Asia dropped more than 2%. The weak employment data in the U.S. sparked a sell-off. India required listed companies to have at least 25% shareholding controlled by common investor to stem market manipulation and broaden shareholding. Reliance Communications approved 26% stake sale.[/R]

Stocks in Mumbai trading dropped 2% in a volatile trading after markets in Asia closed lower on a weaker than expected U.S. jobs report. Private sector added virtually no new net jobs in the previous month.

The Sensex index in India snapped a three-day rally and decreased 336.62 or 1.97% to 16,781.07 and CNX Nifty index fell 107.60 or 2.10% to 5027.90. Among the Sensex 30 stocks, 1 rose and 29 fell.

On BSE trading, 709 stocks advanced, 1,971 declined and 74 were unchanged.

Rupee edged lower 46 paisa to 47.32 against one dollar.

Companies must increase shares held by the public to a minimum of 25% within 5 years by selling at least 5% annually, according to a statement from the Press Trust India.

In a significant step aimed at attracting a larger number of investors and checking manipulation in share prices, the Indian government on Friday made it mandatory for all listed companies to increase public shareholding to a minimum of 25% over a five year period, diluting shares by at least 5% every year.

Under the new requirements by the Finance Ministry, at least 180 companies including 35 government companies controlled will be required to sell shares to the public. In all there are more than 4,500 companies.

At a G-20 meeting in Busan, South Korea on Friday, Finance Minister Pranab Mukherjee clarified on India’s position that the nation will prefer to rely on regulatory mechanism and not levy additional tax on banks.

India opposes levying any tax on its banks to manage future financial crisis and as proposed by developed nations at G-20 summit.

The National Highway Authority of India is awaiting the Planning Commission’s proposal to allow private sector to raise through infrastructure bonds to the tune of Rs 5,000 crore.

The NHAI estimated that the road sector would be among the major beneficiaries when the Planning Commission and the Union Government cleared the proposal allowing private enterprises for the first time to issue tax-free infrastructure bonds.

The provisional winning price for pan-India wireless broadband access spectrum on Saturday crossed Rs 9,800 crore after completion of 82 rounds of bids. With this the government’s assured revenue from the BWA auction is now approaching Rs 30,000 crore. The government has already earned over Rs 67,700 crore from the just concluded 3G spectrum auction.

Reliance Communications Ltd, India’s second-largest wireless carrier, got a board approval to raise capital by sale of 26% stake to the tune of Rs 9,050 crore valued at the last closing price. This was disclosed by the company in Mumbai yesterday.

Gainers & Losers

Cairn India Limited rose 0.05% to Rs 291.70 after crude oil prices plunged more than 4% on the New York Mercantile Exchange on June 4.

GTL Infrastructure Limited rose 7.25% to Rs 39.95 after the company reports it is in talks with Reliance Infratel, the telecom tower arm of Reliance Communications, for a strategic partnership.

IndiaCo Ventures Limited rose 9.14% to Rs 57.30 after the company signed a pact with Bangkok-based CTI-PFAN to work together towards the promotion of energy efficiency technology companies in India.

Jindal Cotex Limited rose 0.28% to Rs 90.10 after the company announced the opening of GDR issue for an aggregate amount up to $50 million.

Mastek Limited surged 12.3% to Rs 274.05 after the company reported it could spend up to $50 million for acquisitions in the insurance vertical in North America and the UK.

Nagarjuna Construction Company Limited fell 3.85% to Rs 178.45 after the company said it is entering into hospitality sector through its unit NCC Urban Infrastructure.

Reliance Communications Limited rose 6.96% to Rs 175.90 after the board approved selling up to 26% stake at a premium to its current market price to strategic or private equity investors.

Sadbhav Engineering Limited rose 0.07% to Rs 1,240.00 after the company announced that it has been awarded two projects by Western Coal Fields Ltd. for Rs 92.08 crore.

Shares of fourteen multinational firms rose 0.52% to 11.12% on expectations new minimum public shareholding norm may encourage foreign promoters to de-list subsidiaries in India.

Span Diagnostics Limited rose 5.7% to Rs 103.60 after the company recommended issue of bonus share in the ratio of 1 to 1 by capitalization of share premium account.

Sterlite Industries (India) Limited fell 4.5% to Rs 621.20 after the company''s ADR plunged 4.71% to $13.14 on the New York Stock Exchange on June 4.

TVS Motor Company Limited fell 3.19% to Rs 104.65 on profit booking after stock rose more than 8% in the past three sessions, boosted by strong vehicle sales in May 2010.

United Phosphorus Limited rose 2.23% to Rs 185.40 on profit booking after the stock surged nearly 7% in the preceding three trading sessions.

Welspun Corporation fell 2.97% to Rs 223.80 on profit booking after the stock rose 6% in the past three sessions.