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BSE wants promoters redefined

Sangita Shah

The Bombay Stock Exchange is planning to formally move the Securities and Exchange Board of India asking it to take a relook at the definition of 'promoters'.

The objective is to give a correct picture of how much equity is available in the secondary market.

The BSE move is important as a significant stake in many blue chip companies held by large investors generally remains locked. Such investors can be broadly classified as promoters.

BSE has sought redefinition of the classification of the shareholding pattern, which the companies have to furnish to the stock exchanges on a quarterly basis. The issue has already been informally raised with Sebi officials especially in terms of determining the available free float and the stake held by strategic investors.

A number of companies like ACC, Larsen & Toubro, State Bank of India, ICICI, BSES and ITC have huge holdings by strategic investors who however are not termed as promoters.

For instance, in SBI, 59 per cent is held by the Reserve Bank of India, which is not classified as promoter but included under the head "investment by banks."

Similarly, in the case of ACC, though there are no promoters per se, it is a known fact that Gujarat Ambuja Cement had bought 14.4 per cent stake held by the Tatas.

Even ITC does not qualify the UK-based British American Tobacco as its promoter even though it holds 34 per cent stake in the company. Similarly, Reliance Industries has more than 34 per cent stake in BSES, but it is classified as a corporate body under the shareholding pattern.

According to the preliminary definition of promoters under the Sebi (substantial acquisition of shares and takeovers) regulations 1997, "promoter" means (i) the person or persons who are in control of the company, or (ii) person or persons named in any offer document as promoters; a relative of the promoter within the meaning of section 6 of the Companies Act, 1956 (1 of 1956).

In case of a corporate body, (i) a subsidiary or holding company of that body, or (ii) any company in which the `promoter' holds 10 per cent or more of the equity capital or which holds 10 per cent or more of the equity capital of the promoter, or (iii) any corporate body in which a group of individuals or corporate bodies or combinations thereof who hold 20 per cent or more of the equity capital in that company also hold 20 per cent or more of the equity capital of the `promoter'.

In case of an individual, (i) any company in which 10 per cent or more of the share capital is held by the `promoter' or a relative of the `Promoter' or a firm or Hindu undivided family in which the `promoter' or his relative is a partner or a combination thereof, (ii) any company in which a company specified in (i) above, holds 10 per cent or more of the share capital, or (iii) any HUF or firm in which the aggregate share of the promoter and his relatives is equal to or more than 10 per cent of the total stake.

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