MNC stocks shine on delisting hopes

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Minimum public holding rule generates buying interest.







Jayanta Mallick
Kolkata, June 7
The announcement by the Government about the minimum public holding, by way of an amendment in the Securities Contract Act (Regulation) Rules, generated some buying interest in certain multinational companies having public holding below 25 per cent, expecting possible delisting move.
According to SMC Capital, there are 22 MNC outfits listed here, which have less than 25 per cent public holding. "Considering the nature of the MNCs, their foreign parent companies may not be that willing to offload their stake or dilute control. Probably, they may choose the route of delisting," it said.
According to Mr Avinash Gupta, Assistant Vice-President - Research Equity, Bonanza Portfolio Ltd, on Monday, there was buying interest in the companies where the holding of the promoter is higher than 75 per cent with pronounced purchases in case of subsidiaries of MNC's.
In a note, Asit C Mehta Investment Intermediate Ltd said the modification in rule increased probability of de-listing of foreign owner-controlled companies.
The note said, "At the end of the March quarter, the holding of the overseas parent of Oracle in Oracle Financial Services Software Ltd (OFSSL) was 80.47 per cent. This will require OFSSL to make fresh issue of shares to the extent of 7.3 per cent of the existing share capital otherwise Oracle will have to reduce its stake by 5.47 per cent. Considering Oracle's practice of de-listing its subsidiaries world-wide and increase in its holding in OFSSL through preferential allotment, open offer and acquisition from the open market over the span of last five years, we believe the new modification in rule increases probability of delisting of OFSSL by Oracle."
On the contrary, the brokerages thought that local promoters with larger holding than the rule prescribed, were likely to dilute their holding and unlikely to go in for delisting. Asit C Mehta felt Wipro might opt for ADR issue to comply with modification in rules.
According to Edelweiss, some of the MNC-controlled entities – such as Bosch Chasis, Lotte India, Madras Aluminum, Matrix Labs, FCI OEN Connect and HSBC Invest Direct - have already displayed the trend of delisting.
According to observers, BOC India, in which promoters' holding is more the than what is required under the modified rules, may find the current situation tricky. So far, the overseas parent has meticulously avoided delisting by not raising their stake, even though it resorted to direct periodic infusion of funds through external commercial borrowings



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