Listed Companies without (Zero) Promoter Holding in the Indian Stock Market ?

 

According to the minimum public share holding rule as per the Regulations for the Indian Equity Market and it's Exchange, a listed company must allocate at least 25 Percent of it's shares to the Public including Retail Market participants. When we say public shareholders(25 Percent Rule), it may include Retail investors, HNI and Large Investors and Institutions. 

On the other side for the Promoters, there is a rule that they should not hold more than 75 Percent of Shares in a single listed company in the Indian Equity Market. If a company owns more than 75 Percent of Shares in a company, then those shares must be sold through Divestment in a particular period of time. 

Generally, these Promoters' Shareholding rules are not applicable for the Government owned companies and exempted entity. So they can hold more than 75 Percent of it's shares at anytime. Eg: Govt owned Insurance Companies, Oil Companies, PSU Banks and others.

At present (as on 31st October, 2023), there are about 72 listed companies that hold more than 75 Percent of it's shares. Among these LIC of India, Mazagon Dock, Indian Bank, Central Bank and others

Only 2,924 listed companies out of 5000+ listed have promoter holdings of more than 50 Percent stake. There are about 158 Companies where the promoter holding is less than or equal to One Percent on Promoter Holding.  Among these few major players are there: ITC Ltd, HDFC Bank, ICICI Bank, L&T and recently Zomato Ltd and One 97 Communications (Paytm).

As common, the contribution of Promoter holding of Shares should be higher than the General Public and other Institutions in a listed company. It is noteworthy that the higher promoter holding contribution is a positive aspect for an investor in the Long term Perspective. Generally, the promoters are not interested or not contribution to their share holding, then what is the reason for the public to hold and trust these companies in the long run ?

Nowadays, few of the listed companies where the promoter holding is more than 50 Percent were enjoying the Profits of a company through Dividends and Buyback of shares. Founders and Promoters' contribution is seen as an important ratio of a listed company. However in some companies there is no or less contribution on behalf of the Promoters, what we have seen earlier. 

If you ask whether those companies(Zero Promoter holding) are good at it's fundamentals or not, then it is purely depending upon it's Business and Management of the company. 

Can a company run without Promoter Holding in the Equity Market ?

The answer is 'YES'. It can run freely without the contribution of Promoter or Founder Holding. Few people implement and run such companies by nominating the Skilled and Experienced Professionals like Expertise to take advantage in that industry as per the Regulations. 

In fact, they don't have any shares in the Promoters Side. However they may hold the shares through other Public Shareholding like Individually or by Institutions. Thus, it may control the company indirectly without promoter holding of shares.

Even in the largest contribution of Shares in the Promoter holding, one have to be cautious if those promoter shares are pledged with Banks or any institutions. Founders and Promoters may also be absent in the case of Corporate Takeover, Bankruptcy and other related things.

If the promoter is not participated well in the Equity market on Shares, then we have to watch the management of the company how it runs effectively. It's all about Business and Corporate Governance.

Therefore, it is important for an Investor to look at a Company's Financial track record, Corporate Management, Debt effectiveness while analyzing a company. Otherwise, for the investor... It's Nothing!

Kindly share your views /  comments with a smile :)

www.richinvestingideas.com