Billionaires Rush Share Sales Before Deadline: Corporate India
BGR Energy Systems Ltd. (BGRL) and Foseco India (FSC) Ltd. are among 24 Indian companies that need to sell 22 billion rupees ($393 million) of shares before a deadline to meet the minimum public holding rule expires in two days.
Company founders must trim their stakes to 75 percent by June 3 to ensure a public float of least 25 percent or face “severe consequences,” U.K. Sinha, chairman of the Securities and Exchange Board of India, said May 20.
The last-minute rush to meet the government rule announced in June 2010 has led to equity sales of about $1 billion this month from at least 22 firms including DLF Ltd., the largest developer, and JSW Energy Ltd. (JSW), owned by the billionaire Jindal family, data compiled by Bloomberg show. With the offers set to end next week, foreign flows to the stock market may increase, helping the S&P BSE Sensex (SENSEX) extend the best gain this year in the group of emerging-market nations known as the BRICs.
“The market has held up pretty well so far despite having to absorb this paper as foreigners have committed $2 billion - to-$3 billion” to the share sales, Taher Badshah, senior vice president and co-head equities at Motilal Oswal AMC Ltd., which has $300 million in assets, said by phone yesterday. “Funds would be freed after the offer-related overhang is gone.”
Overseas funds have bought a net $14.9 billion of Indian shares in 2013, a record for the period and the second-largest among 10 Asian markets tracked by Bloomberg, behind Japan. The Sensex has risen 1.7 percent this year, climbing to its highest level in more than two years on May 17. The Ibovespa, Brazil’s main gauge, has slid 10.4 percent in 2013, while Russia’s Micex Index has lost 8.5 percent. China’s Shanghai Composite Index has risen 1.4 percent this year.
Jet Airways (India) Ltd. (JETIN), the nation’s largest publicly traded carrier, received bids for 2.99 million shares, less than the 4.3 million shares, or 5 percent of the total capital, offered, according to a filing yesterday. The company had set a floor price of 510 rupees apiece for the sale that will cause the founder holding to shrink from about 80 percent.
Jet said today the founders have received the regulator’s approval to sell up to 1.54 percent stake in the open market. The stock tumbled 6.9 percent to 491.8 rupees at the close, the sharpest fall since March 4.
Jet was one among nine companies, including Novartis India Ltd. (HCBA), that sold shares yesterday. Novartis sold 454,205 shares at a floor price of 375 rupees apiece, according to a filing to pare the parent’s stake from 76.42 percent.
Sun TV, BGR
Sun TV Network Ltd.’s (SUNTV) offer to sell 7.88 million shares was fully subscribed, according to a May 29 filing. The shares fell 1.7 percent to 421.05 rupees yesterday, compared with the floor price of 403 rupees each set for the sale. Billionaire founder Kalanithi Maran’s stake will fall from 77 percent.
BGR Energy founder will sell 4.42 million shares, or 6.1 percent stake, on June 3, according to a filing today. BGR’s shares slumped 3.5 percent to 192.95 rupees. Chemicals maker Foseco India is yet to comply with the shareholding rule, said Company Secretary Mahendra Kumar Dutia. The founders’ stake “is a fraction more than 75 percent,” he said by phone today.
The regulator will likely limit founder voting rights at 75 percent if they don’t meet the June 3 deadline, Bloomberg TV India reported, citing people it didn’t identify. An e-mail sent to the press office of the regulator wasn’t answered.
Government-owned companies only require 10 percent of their shares traded publicly and have until Aug. 9 to comply with the rule, according to the regulator. That may prompt as many as 12 state-run enterprises to sell shares worth $680 million, Kotak Institutional Equities said in a May 23 report.
The government controls more than 90 percent in enterprises including MMTC Ltd., the nation’s largest trading firm, HMT Ltd. and Hindustan Copper Ltd. (HCP), according to the Kotak report.