MNC stocks rally as RBI allows promoters to hike stake

MUMBAI: Shares of multi-national companies surged after the Reserve Bank of India (RBI) allowed foreign promoters to hike stake without taking its nod.

The RBI has made it easier for foreign and non-resident Indian promoters to increase their stake in domestic companies through the foreign direct investment (FDI) route.

Promoters can increase their stake to a maximum of 75 per cent either though open offer or open market purchase. However, in the open market promoters are allowed to buy a maximum 5 per cent of the total equity in a year.

"The central bank's new circular gives more parity to overseas promoters to increase their stake in Indian subsidiaries under FDI norms," said Ravi Sardana, EVP investment banking, ICICI Securities told The Economic Times.

"The sharp fall in the rupee and share prices provide a good opportunity for foreign promoters, especially MNCs, to consolidate their stake at a reasonable price," he added.

"The RBI move not only brings more foreign funds to India, but allows foreign promoters to use the amount received from its Indian arm through dividend to buy stocks. This will discourage dollar outflow," said G Chokkalingam, executive director and CIO, Centum Wealth Management.

"The current situation makes these potential transactions cheaper by almost 30 per cent than a few years ago," he added

At 02:45 p.m.; ABB India surged 18.24 per cent, Alstom India was up 5.57 per cent, Siemens moved up 6.73 per cent, Heidelberg Cement rallied 8.78 per cent, SKF India advanced 3.94 per cent and GSK Pharmaceuticals was up 2.81 per cent.