India Acts Against Founders for Missing Holdings Rule Deadline

Adani Ports & Special Economic Zone Ltd. (ADSEZ) and Essar Ports Ltd. (ESRS) are among 105 Indian companies whose founders’ voting rights have been curtailed for not meeting a minimum public shareholding rule.

Owners voting rights of non-compliant companies have been capped at 75 percent and they won’t receive dividend on shares exceeding the limit, the regulator said in a statement late yesterday. Founders were required to reduce their holdings to 75 percent to ensure a public float of least 25 percent by June 3.

The rush to meet the ownership requirement announced in June 2010 led to share sales of at least $1 billion last month from firms including DLF Ltd., the largest developer, and JSW Energy Ltd. (JSW), owned by the billionaire Jindal family, data compiled by Bloomberg show. Exchanges globally introduce free-float rules to ensure adequate liquidity for investors in a publicly traded stock. Index compilers such as MSCI Inc. take into account the percentage of shares available to investors when determining a stock’s representation in stock gauges.

Owners and directors of the non-compliant firms have been barred from holding new position as a director in any publicly traded company until they comply. Plethico Pharmaceuticals Ltd. (PLEP), BGR Energy Systems Ltd. (BGRL) and Bombay Rayon Fashions Ltd. (BRFL) are among the 105 companies whose founders and directors face the prohibitory order, according to the regulator.

A spokesman for Adani Ports declined to comment, while a spokesman for Essar Ports, and Hitesh Thakar, a spokesman for Plethico Pharmaceuticals, didn’t immediately respond to calls, text message and e-mails seeking comments.

Adani Ports offered to sell 66.6 million shares at 148 rupees to 158 rupees apiece through an institutional placement on June 4, according to an exchange filing on June 3.

To contact the reporter on this story: Santanu Chakraborty in Mumbai at schakrabor11@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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