Mumbai, Aug. 26: Azim Premji ' the richest man in India ' may have to do something he has resolutely resisted till now: cut his stake in Wipro.
The market regulator ' Securities and Exchange Board of India (Sebi) ' today directed promoters of companies with a high stake to ensure a public shareholding of 25 per cent at all times. It gave them two years to comply.
The move has been coming for some time. In January, Sebi amended the takeover code to integrate its provisions with the delisting guidelines of the stock market. It set a minimum public shareholding limit of 25 per cent for all listed companies. Today, it went a step further and told them to comply with the rule in two years.
The promoters ' including associates and friends ' have been given time to reduce their stake so that it doesn’t precipitate a slide in the biggest bull market in recent years.
Besides Premji, many others are affected.
Sebi has said telecom, media and technology companies, which have listed in recent years, will not be covered by the regulation.
Premji could try and seek some comfort under this rule but it may not work. Wipro was originally listed on the market as an edible oil company and later went into infotech. It still earns a part of its revenues from non-technology businesses and may not qualify.
Others that have earned a waiver from the rule are government-owned companies, firms that were allowed to float shares through recent equity issues that capped public holding at 10 per cent, and sick companies that have been recast under schemes of the Board for Industrial and Financial Reconstruction.
Eventually, all of them will have to fulfil the norm.
“What Sebi has said today is a very reasonable formulation,” Adi Godrej of Godrej Industries said.
“Over the next two years, we will issue new capital to the public and bring down our shareholding.”
Sebi’s directive opens up an opportunity for general investors to buy shares in bluechip companies.
Nimesh Kampani, chairman of JM Morgan Stanley, an investment banker, said: “It’s good for the market. It would mean more supplies of equity stock and companies can raise more resources.”
Not everyone may share Godrej’s view. The regulator has not yet said what will happen to promoters who refuse to comply.
“Some day we will reach there (public shareholding of 25 per cent in all listed companies), but we will reach there in a non-disruptive manner,” Sebi chairman M. Damodaran told reporters.
The regulator is mulling the option of penalties on recalcitrant promoters.
Companies like AstraZeneca may decide to go the other way by buying back the remaining 10 per cent from the public and delisting the stock.
Premji can sell about 7 per cent of his holding either on the local bourses or on the New York Stock Exchange where the stock is listed. He can also offer stock as the currency for acquisitions.
If Premji cashes out, he could net almost a billion dollars. He will still be rich.