Budget Impact on 25 Large Cap Companies Promoter Holding

Proposed Increase in Public Holding to 35% from 25%

Introduction

In this article, we are going to see what is the Budget impact on 25 Large Cap Companies with higher Promoter Holding (in which promoters’ holding is more than 65%).

Proposal of increased Public Holding in Budget

• Finance Minister has recommonded SEBI in the Budget 2019-20 to bring down the promoters’ maximum holding in the company to 65% from 75% as it was earlier.
• No specific timeline was stated in the budget for dilution of promoters’ stake in the companies. Currently, it is just a proposal made by the Finance Ministry. But, whenever such recommondations are made from Finance Ministry and are to be implemented, then SEBI gives 2-3 years to the companies to comply with the revised limit and the companies are required to fulfill it.
• Let us see when SEBI would frame these recommondations into rules and regulations, after which those companies will require to implement these increased public shareholding norms accordingly.

Budget Impact on 25 Large Cap Companies Promoter Holding

• Here, we have focused Large cap companies and enlisted 25 such large cap companies where the promoters’ holding is more than 65% currently. Thus, we will discuss what is the Budget Impact on 25 Large Cap Companies with higher Promoter Holding.
• According to SEBI’s new categorization of companies by market capitalization, published on June 30, 2019, the companies with market cap more than Rs.29,000 Crore are identified as Large cap companies. As we know, top 100 companies according to the market cap are Large cap companies. Here, we have shortlisted 25 such large cap companies where promoters’ holding is greater than 65%.

Let us see which are these 25 companies :

Shortlist Findings :

• There are total 25 Large cap companies, in which promoter holding is more than 65% currently.
• Sector-wise categorization of these 25 stocks are given in above table.
  • 8 – Financial sector companies including banks, mutual fund and insurance comapnies.
  • 4 – FMCG companies
  • 2 – IT companies
  • 2 – Mining companies and
  • 9 – other sector companies

Financial Sector Companies

In this sector, General Insurance Corporation of India(85.78%), HDFC AMC(82.72%), Bandhan Bank(82.26%), HDFC Life Insurance(76.14%), Punjab National Bank(75.41%), ICICI Pru Life Insurance(74.98%), SBI Life Insurance(69.80%), Bank of Baroda(69.23%) these are the large companies with the promoter holding % mentioned.

FMCG Companies

While in FMCG sector, Dabur(67.90%), Hindustan Unilever(67.19%), GlaxoSmith Consumer Healthcare(72.46%), P&G Hygiene(70.64%) are included.

IT Companies

TCS(72.05%) and Wipro(73.85%) are the two IT giants in which promoter holding is more than 65%.

Mining Companies

In Mining and Minerals segment, NMDC ie. National mineral Development Corporation(72.28%) and Coal India( 70.96%) are the large cap companies with the corresponding promoter holding given in the bracket.

Other Sector Companies

In other sector companies, following companies are included. Their corresponding promoter holding % and sector is mentioned.

Conclusion

• In the Budget, this move to increase public holding from 25% to 35% will lead to valuation corrections as many of these 25 stocks are quoting at premium valuations because of the restricted free float. 
• The longer the correction time it will take, the severe these companies share price will affect. Many of the MNCs such as Siemens, Bosch might opt for delisting. Because the foreign promoters would not prefer to dilute their stake and lose the control over their company.