Retail stake in listed cos falls, promoters & FIs ramp up holding

MUMBAI: It may be a deliberate attempt or an unintended side effect, but retail investors are gradually being deprived of a share in the Indian equity pie. The share of individual investors in Indian companies has been shrinking steadily so much that the average individual shareholding in private sector companies has dipped to around 13% and and to about 2% in public sector companies.

According to an ET study on ownership pattern of top 200 (BSE 200) Indian companies, retail shareholding is infinitesimal, while a substantial chunk of shares are controlled by promoters and institutional investors. Among private sector companies, Bharti Airtel (1.2%), GVK Power (2%), Educomp Solutions (2.1%), Sobha Developers (2.1%) and Tata Communications (2.2%) are languishing at rock-bottom levels with regards to individual shareholders. In the PSU list, National Aluminium, Hindustan Zinc, Neyveli Lignite, ONGC and SAIL have 0.7%, 1.5%, 1.5%, 1.7% and 1.8%, respectively, as public shareholding.

���Very few companies would really like to expand the base of retail shareholders public shareholding,��� says Investor Grievances Forum president Vipul Modi. ���They would any day prefer to raise capital by diluting a small percentage of equity when the market is buoyant,��� he adds.

Taking a view on dwindling share of minority stakeholders, the finance ministry had floated a concept note in February, seeking public comment with regards to mandatorily raising public shareholding (including institutional investors) from 10% to 25%. The move is expected to increase public participation, transparency and overall governance in the market. Currently, only 7 out top 200 Indian firms have public shareholding in excess of 25%. According to experts, Indian companies are not favouring a uniform 25% minimum public shareholding for all listed companies as proposed by the finance ministry.

According to study by Assocham, FIIs occupy the maximum share of non-promoter holdings which fall in a range of 40-60%. They are followed by insurance companies with a range of 5-20% and mutual funds ranging between 1-3%. As of now, Sebi has mandated that 25% shareholding will not be applicable to public sector enterprises, infrastructure companies and BIFR companies.

���The irony is that several real estate companies are claiming themselves to be infrastructure companies and are availing themselves of this cut,��� Mr Modi added. Policy changes over the years have played a major role in edging out small investors from the market. ���The concept of public listed companies has been hugely diluted. Public offer as a percentage of a company���s equity capital has been brought down from 75% to 25% and in some cases to just 10%,��� Prime Database���s Prithvi Haldea said.