Forced stake dilution by corporates to reduce their holdings may lead to loss of wealth and active interest of the promoters. It may also defeat the objective of triggering overseas investor interest through increased free float of shares, according to Kuldip Singh Dhingra, chairman, Berger Paints India Ltd.
Budgetary proposal
Mr. Dhingra was referring to Union Finance Minister Nirmala Sitharaman’s budgetary proposal to consider increasing the minimum public shareholding in listed companies. The Minister had said that she had asked SEBI to consider raising the current threshold of 25% to 35%. Pointing out that public and private sector companies would be affected by the move if it materialised, he said while a large section of PSUs had not been able to achieve their dilution targets, quite a few private sector companies had faced penalties. On the government’s argument that the move would bring in foreign currency to India through renewed interest of overseas investors and exchange traded funds in Indian companies, Mr. Dhingra said that the challenge overseas investors with surplus funds faced was finding good companies to invest in.
“The shortage is not that of ‘share scrips’, but of reliable companies where their monies can be invested,” he said, adding that they preferred companies focussed on their core competencies and companies, where promoters had a significant stake. They also factored in country risk and currency volatility before taking an investment call, he said.
“In my view, long term creation of wealth through maximum leveraging of core competencies, under the stewardship of a professional management and responsible promoter group, benefits the economy and minority shareholders alike,” he said.
Mr. Dhingra felt that overseas investor interest followed as a consequence of a well-managed company and not because free float was suddenly available. “If a company is managed poorly, no amount of free float will help shore up its value of attract investment,” he said.
The promoters’ stake in BPIL is 75%. This includes the family holding, other investors and Jenson & Nicholson (Asia) Ltd.
