Budget 2019 came as a negative signal for Indian stock market on Friday as a lot was expected from Finance Minister Nirmala Sitharaman. What’s more horrible is that companies like TCS and Wipro saw their stocks falling uncontrollably.
Also, Indian government raised the minimum public shareholding required in listed companies to 35% from 25%, which came as a surprise move. Companies which have a large shareholding by either their founders or owners like Tata Consultancy Services Ltd, Wipro Ltd, Coal India Ltd, Hindustan Unilever Ltd lost big money.
For these companies, maintaining a 25% public shareholding was already difficult and increasing it to 35% has made it worse for large corporations. Due to this very reason, some companies have also accelerated their plans to delist themselves from the market.
Commenting on this, Rajiv Singh, of Karvy said “100 of the BSE 500 companies that capture the bulk of the market capitalization in BSE Ltd are more than 65 percent owned by their controlling shareholders. Government holdings will also be affected as 40 state-run companies have public shareholdings of less than 35%.”
The need to increase public shareholding would result in companies having to offer approximately 1 trillion rupees ($15 billion) in shares currently owned by controlling shareholders to the public, he added.
Quotes source: Reuters
However, it is to be noted that the government hasn’t cleared that whether the public shareholding hike will be applicable to existing listed companies or only to the upcoming ones.
Among the Nifty50 companies, 5 companies namely- Wipro (73.90%), TCS (72.10%), Coal India (71%) and HUL (67.2%) and Bharti Airtel (67.1%) had promoter holding in excess of 65% as of March 31, 2019 and these companies are ones which will be most impacted.
Also Read: Why Tata Motors Lost 27,000 Crore In The Third Quarter
