MNCs decides to reduce promoter shareholding to be in line with listing norms
(Indian subsidiaries of…)
Intimidated by the huge costs involved in delistingshares from local bourses, the Indian subsidiaries of foreign multinational firms have decided to reduce promotershareholding to stay in line with listing norms, rather than mop up shares of minority investors.
The move by the multinationals caught many investors by surprise on Wednesday after two more companies - Honeywell Automation and Blue Dart Express - decided to reduce shareholding through the offer for sale (OFS) route instead of delisting its Indian subsidiaries from the local stock bourses.
The proposed offer for sale by these companies triggered panic among the investors of other multinational companies who have bought these stocks in anticipation that the multinational firms will delist their shares to escape Sebi's minimum public shareholding norm by acquiring the stakes held by minority investors at a huge premium.
Shares of MNCs declined between 2% and 6% on Wednesday against the 1% gain by the main stock barometer the BSE Sensex.
Shareholders in Honeywell Automation, supplier of industrial automation and control solutions, hammered the company shares down soon after the announcement on Wednesday, with the shares shedding a fifth of their value, or 20%, to close at Rs 2,504, a share. Blue Dart shares closed up 2.2% to Rs 1,713.85 a share as the announcement of promoter's divestment through secondary sale came after market hours.
Investment bankers believe that more MNCs may go for the OFS window to shore up non-promoter holdings as delisting is not viable.
"Promoters prefer the OFS route to delisting because of cost implications as many stocks have run up in anticipation of delisting offers at high premiums. Further, the deadline for increasing the public holding to 25% is approaching, and the OFS route provides a higher degree of certainty of completion," said Ravi Sardana of ICICI Securities.
Honeywell Automation stock surged 16% to a record high of Rs 3,392 on last Friday on reports that promoters are considering delisting of its Indian unit from bourses. This was apparently denied by the company and subsequently the stock corrected 6% on Monday. Honeywell Automation has surged nearly 82% so far this year through Monday in anticipation of an open offer for delisting.
Honeywell Automation during market hours said its foreign promoter Honeywell Asia Pacific Inc, which holds an 81.24% stake, in due course intends to reduce its shareholding in listed Indian unit in one or more tranches through the the OFS mechanism through a separate window provided by the stock exchanges for this purpose.
The company spokesperson told ET, "In order to meet the compliance requirements established by India's ministry of finance, Honeywell has announced its intention to reduce its ownership in Honeywell Automation India (HAIL), in due course, to 75%, thereby increasing public shareholding to 25%, through an "offer for sale" process, which we will endeavour to complete by June 2013. Honeywell maintains an optimistic view of the future business opportunities in India." The company has an equity capital of Rs 8.84 crore with a face value of Rs 10. At CMP, the promoters could raise up to Rs 175 crore by selling their 6.24% stake.
On the other side, DHL Express (Singapore), promoter of Blue Dart Express, has proposed to sell 14.32 lakh shares, or 6.03% equity capital, on November 23 though OFS. Blue Dart is the third company after Fresenius Kabi Oncology and Disa India, which has proposed to increase the public holding to 25% to meet the Sebi norms.