The Hindu Business Line : Foreigners hold 30 pc shares in Nifty cos

If you look at the ownership of Indian companies, you might wonder if East India Company syndrome - a sort of creeping acquisition of effective control and wealth - is under way. The shareholding pattern of the top Indian companies is increasingly acquiring a global hue.

On an average, foreign entities held 30 per cent of India's top 50 companies (Nifty 50) shares at the end of 2003. It has increased from 23 per cent at the end of December 2002 and 17 per cent at the end of 2001.

In terms of wealth, foreigners now control a third of the market capitalisation of the Nifty companies. An analysis of the shareholding pattern of the 50 companies shows that the increase in foreign holding in sectors such as energy (oil & gas, petrochemicals, power) and auto has been dramatic. The increase in shareholding in 2003 has, however, been largely restricted to companies in which foreigners already held a sizable stake. The number of companies with more than 25 per cent foreign shareholding rose only by one to 26 in 2003.

Twenty of them are companies promoted by Indians, which include Grasim, Hindalco, Reliance Industries, HDFC Bank and ICICI Bank, and six are affiliates of multinational companies. For instance, in the banking sector, the existing regulation, too, favours higher foreign investor holding. Foreign direct investment in this sector is permitted up to 74 per cent; on the contrary, the Indian promoter can hold only up to 49 per cent.

From an investor's perspective, the trend may not be altogether a positive development. The Chief Financial Officer of a Mumbai-based services company suggested that in his previous stint as a fund manager, he tended to view rising foreign holding negatively, as it reduces the free float of the stock. This, he averred, made it difficult for institutional investors to buy and sell the stock. Now, in his current role, he views the development favourably. According to him, this leads to improved price discovery and also ensures fewer problems when companies want to raise fresh capital.

More Stories on : Stock Markets | Trends

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Forex reserves rise $402 m on dollar mop-up

Diabetes segment may see price cut in drugs, insulin

Online fund transfer system comes into being

Foreigners hold 30 pc shares in Nifty cos

Where fixed deposits give higher rates

Gelli likely to take part in GTB rights issue