Compliance to meet the SEBI deadline on minimum public shareholding seems to be gathering steam with three companies announcing steps to dilute the promoter’s stake in the last couple of days.

But the route to achieve the goal appears to be different with two of the companies opting for Institutional Placement Programme (IPP) while another had opted for the stock exchange route. But it appears that with the stock markets peaking, those promoters diluting their stake could not have asked for a better time to do so!

On Monday, Prestige Estates Projects Ltd and Mahindra Holidays had notified the stock exchanges about their decision to adopt the IPP route of private placement of shares to dilute the promoter’s holding. 

Prestige Estates said that the IPP Committee of the Board has fixed a price band of Rs 161 to Rs 170/share for the proposed issue that would open and close today (Jan 23). The company proposes to issue up to 19,932,937 shares with an option to make additional allotment of up to 1,993,293 shares.

While the promoter’s holding is at 80.01 per cent, FII’s stake in the equity is 10.98 per cent, DIIs hold 6.70 per cent and others 2.31 per cent. In the quarter ending Sept, 2012, Prestige Estates had a turn over of Rs 223.29 crore that was substantially higher than Rs 125.43 crore in the corresponding quarter of previous fiscal. The net profit of Rs 45.69 crore was also far higher than Rs 26.28 crore in the same period last year.

However, the company has a huge equity base of Rs 328.07 crore which had an impact on the EPS that stood at Rs 1.39 (Rs 0.80) in the Sept 2012 quarter. The stock’s current PE multiple of 35 is rather high. 

Mahindra Holidays & Resorts India Limited has also announced its intention to launch an Institutional Placement Programme apparently to fall in line with the SEBI regulation. At present, the promoter's stake in the company is 82.69 per cent.

In a communication to the stock exchanges, the company said that it would issue equity shares through IPP in one or more tranches.

While FIIs hold 3.68 per cent stake, the DIIs hold 0.77 per cent stake and others hold 12.86 per cent of the equity as at the end of Sept 2012.

Another company to announce promoter stake dilution was Jaiprakash Associates Limited in its group company Jaypee Infratech Ltd of up to 27,864,584 shares. Additionally, the promoters might sell up to 70,619,430 shares in JIL and this sale would take place on Jan 24 through a separate window in both NSE and BSE.

In all these cases, while the stocks have come off their 52 week highs, they are quoting far higher than their 52 week lows. It was possible that with the Sensex trading above 20,000 points, the companies might sense that the present moment might just be the right time to comply with SEBI diktat on minimum public shareholding coming into effect from June as this would also bring the promoters higher realisation from their stake dilution.  

Shares of Jaypee Infratech Ltd (JIL) were trading at Rs 50.55 in the BSE today. While the stock is off its 52 week high of Rs 61.50, it is far above the 52 week low of Rs 39.80.

Prestige Estates was trading at Rs 176.00 that was less than the 52 week high of Rs 191.70. But the stock had more than doubled from its 52 week low of Rs 72.65 in the BSE. 

Mahindra Holidays & Resorts was quoting at Rs 314.60 in the afternoon trade today. This stock too had appreciated significantly from its 52 week low of Rs 255, though it is also off its 52 week high of Rs 358.

(This article was published on January 23, 2013)
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