Shares of the Indian units of MNCs are on the front-foot this year on investor hopes that many of their promoters may delist them in view of a government directive to increase public-holding in listed firms to a minimum of 25 per cent in about a year’s time.
Shares of multinational companies (MNCs) have jumped 11-104 per cent as compared to the BSE index,Sensex,which has gained nine per cent so far this year,according to the information available with the stock exchanges.
Market experts believe that share prices of the Indian units of MNCs have seen a substantial gain on the expectation that their parent organisations may opt for delisting them following the government ruling.
However,they added that there is a potential risk of share prices correcting sharply,especially if industry demand for extending the deadline for complying with the minimum public holding norm beyond June 3,2013 is agreed to.
Fairfield Atlas has gained 104.15 per cent,Thomas Cook (85 pc) BOC India (61.26 pc),Fresenius Kabi Oncology (62.1 pc),AstraZeneca Pharma (55.72 pc),Singer India (53 pc) and Honeywell Automation India (49.12 pc).
In addition,Oracle Financial Services Software surged 35.38 per cent,Wendt India (31.54 pc),Elantas Beck India (35.52 pc) and Timken India (30.06 pc).
Other gainers were Gillette India,Ineos ABS (India),Blue Dart Express,Novartis,3M India,Cambridge Solutions,APW President Systems.
The BSE barometer Sensex has gained 8.9 per cent so far in this year to close at 16,831.08 points on Friday.
“With Sebi mandating that all listed companies have to increase public shareholding to a minimum 25 per cent by June 2013,these companies have to take a call sooner or later whether to reduce promoter holding or go for delisting mechanism,” Destimoney Securities MD and CEO Sudip Bandyopadhyay said.
“Good management and corporate governance are other factors driving these stocks,” he added.
Another Analyst Kishor Ostwal of CNI Research said,”Counters of the Indian units of MNCs have witnessed surge on account of being potential delisting candidates.”
He said,”June deadline may be extended as government itself has not complied with the regulation. There are several listed companies where government holding is 70 per cent. If it would happen,we would see some corrections in these stocks.”
Ostwal said investors can also lose in the short-term if MNCs opt for equity dilution to stay listed.