Engineering major ABB is caught in a strange predicament. It has to incur disproportionate costs such as appointing bankers, selling brokers, appoint exchanges to sell a single share, which the promoters hold in excess of the permissible limits.
Securities and Exchange Board of India (Sebi) rules mandate that private sector companies are required to have a minimum public shareholding of 25%. Companies that are not in compliance have been given time till June 2012 to comply with this norm.
According to the latest shareholding pattern, ABB’s public shareholding is 52,977,093 shares. Out of the total outstanding shares of 211,908,375, public shareholding comes to 24.99999965%. The promoter holding of 158,931,282 shares or 75.00000035% is held by two entities ABB Asea Brown Boveri and ABB Norden Holding. Therefore, promoters have to sell one share more.
In an email response, ABB Limited in India confirmed that it is exploring ways to comply with the minimum public shareholding requirement.
Since the rules specify that the public holding has to be increased “in the manner prescribed by Securities and exchange board of India (Sebi), a simple options such as an open market sale of the share are ruled out.
Sebi has specified five methods for increasing the public shareholding so far. In addition to a follow on public offering(FPO), companies can use methods such as Offer for sale through stock exchanges (OFS) and institutional placement programme (IPP). Recently, Sebi also allowed additional methods such as rights issues and bonus issue as the regulator is keen on getting at least some 193 companies who are not in compliance to meet the deadline.
However, it seems architects of these different methods did not probably conceive a situation where somebody may have to sell a single share. For example, one of the conditions for institutional placement is that “There shall be atleast 10 allottees in every IPP issuance. No single investor shall receive allotment for more than 25% of the offer size.”
Sebi also said, “This method can be used only for the purpose of complying with minimum public shareholding requirements under SCRR, either by way of fresh issue of capital or dilution by the promoters through an offer for sale.”
Similarly under OFS, the offer shall be “for at least 1% of the paid-up capital of the company, subject to a minimum of Rs. 25 crore.”
ABB shares gained 0.7% closing at Rs 776.70 per share on BSE. Other methods such as rights issue or bonus issue are also considered time consuming in addition to the various costs.
Bankers said the company could approach Sebi considering the peculiarity. “Sebi after its last board meeting had said that they will be open for changes to the existing methods on a case by case basis. This could be one such case,” said Manoj Kumar, assistant vice president, Corporate Professionals, a Delhi based investment bank.
“Further, modifications, if any, as may be necessary, to the existing methods, will also be carried out to make them more operable,” Sebi had said in its press release after board meeting on September 16.
Securities and Exchange Board of India (Sebi) rules mandate that private sector companies are required to have a minimum public shareholding of 25%. Companies that are not in compliance have been given time till June 2012 to comply with this norm.
According to the latest shareholding pattern, ABB’s public shareholding is 52,977,093 shares. Out of the total outstanding shares of 211,908,375, public shareholding comes to 24.99999965%. The promoter holding of 158,931,282 shares or 75.00000035% is held by two entities ABB Asea Brown Boveri and ABB Norden Holding. Therefore, promoters have to sell one share more.
In an email response, ABB Limited in India confirmed that it is exploring ways to comply with the minimum public shareholding requirement.
Since the rules specify that the public holding has to be increased “in the manner prescribed by Securities and exchange board of India (Sebi), a simple options such as an open market sale of the share are ruled out.
Sebi has specified five methods for increasing the public shareholding so far. In addition to a follow on public offering(FPO), companies can use methods such as Offer for sale through stock exchanges (OFS) and institutional placement programme (IPP). Recently, Sebi also allowed additional methods such as rights issues and bonus issue as the regulator is keen on getting at least some 193 companies who are not in compliance to meet the deadline.
However, it seems architects of these different methods did not probably conceive a situation where somebody may have to sell a single share. For example, one of the conditions for institutional placement is that “There shall be atleast 10 allottees in every IPP issuance. No single investor shall receive allotment for more than 25% of the offer size.”
Sebi also said, “This method can be used only for the purpose of complying with minimum public shareholding requirements under SCRR, either by way of fresh issue of capital or dilution by the promoters through an offer for sale.”
Similarly under OFS, the offer shall be “for at least 1% of the paid-up capital of the company, subject to a minimum of Rs. 25 crore.”
ABB shares gained 0.7% closing at Rs 776.70 per share on BSE. Other methods such as rights issue or bonus issue are also considered time consuming in addition to the various costs.
Bankers said the company could approach Sebi considering the peculiarity. “Sebi after its last board meeting had said that they will be open for changes to the existing methods on a case by case basis. This could be one such case,” said Manoj Kumar, assistant vice president, Corporate Professionals, a Delhi based investment bank.