“We will be seeing a series of delistings because most of the foreign companies have a 10% float in India, which was just to comply with the norms,” says Jagannadham Thunuguntla, head of equities at SMC Capitals.

1. MNC’s India Shares Soar on Float Rule Change
June 7, 2010, 1:50 PM IST
There is at least one group of companies that should happy to see the government’s new rules on share
floats: India-listed multinationals.
Shares of multinational companies listed in India rose sharply Monday, ignoring falling Indian and world
markets, after the federal government amended the Securities Contracts rules and said all listed
companies need to have a public holding of at least 25%, up from 10% earlier.
Most foreign companies listed in India have a public float of less than 20%. The new regulatory
requirement is sparking hopes that the companies will either increase their float by offering investors
more shares or opt to delist themselves from the stock exchanges.
Companies such as Alfa Laval India and Gillette India were up 5.1% and 7.3%, respectively, by early
afternoon, while BOC India and 3M India rose 11.3% and 6.9% respectively. The benchmark Sensex was
down 2.0%.
Market watchers seem to think delisting would be the preferred option, which means they’ll have to buy
out existing shareholders. Many of the companies who listed their shares here did so to comply with
regulations that are now irrelevant, freeing them up to operate in India without a listing, analysts said.
“We will be seeing a series of delistings because most of the foreign companies have a 10% float in India,
which was just to comply with the norms,” says Jagannadham Thunuguntla, head of equities at
SMC Capitals.
But one wonders if the companies will go to the trouble of doing anything at all, especially given the fact
that the government has not specified any penalty for firms that do not comply. In addition, when
investors in the current market are so averse to risk, they may not be willing to look at a host of secondary
share offerings from domestic or foreign companies.

2. The government has said that companies with a public holding of less than 25% need to reach that level by
an annual increment of a minimum of 5%. Mr. Thunuguntla says the government’s rule could lead to
companies collectively trying to raise about 610 billion rupees (about $13 billion) in this current financial
year, which runs until March 31, 2011. But they may not get a very good price.
“There is no fascination for new paper,” he says. “Most initial public offerings are hardly seeing any
subscription and most of them are listing lower than the issue price.”