Sebi’s diktat to listed companies to dematerialise at least 50% of the non-promoter holding by October 31 has been ignored by many companies. This has prompted stock exchanges to shift their securities to trade for trade, or T segment, as a punitive action. In the T segment, only delivery-based transactions are permitted, and no intra-day squaring of trades is allowed. All the scrips listed in this segment will attract circuit filter — the maximum limit up to which the share price can move on either side — of 5% or lower.
The Bombay Stock Exchange on Monday announced a list of 159 scrips which are being shifted to the T group as part of the exchange’s surveillance measures and also due to their failure to comply with Sebi’s requirement on dematerialisation of non-promoter holding.
With this, the total number of T group scrips has shot up to 700 plus from 365 as of August-end. Samtel Color, Subros, Hind Inds, Vascon Engineers, Kalpena Inds, Lanco Inds, Balaji Distilleries , Indian Metals & Ferro Alloys and Jaybharat Textiles are a few companies with decent background in which more than 50% of the non-promoter holding was in physical form as of September-end.
As their shareholding data has not been updated, it is possible that some of them may have complied with Sebi’s new rule on dematerialisation by now and so no longer fall in the category of non-compliant companies.
Under dematerialisation, shares are converted into an electronic form to avoid problems arising out of mismatch and forgery of signatures and fake certificates. An investor has the option to hold securities either in physical or electronic form. However, Sebi has notified that settlement of trades in listed securities should take place only in demat mode.
KR Choksey Shares and Securities chairman Kisan Choksey feels lack of awareness among shareholders could be one of the reasons why some companies failed to comply with the Sebi rule. The managements of these companies should make efforts to create awareness about advantages of having shares in electronic form, he said.
Dematerialisation of shares will lead to better price discovery as it widens the scope for investor participation and improves liquidity. “Sometimes, promoters themselves may not be keen on dematerialisation as they are not concerned about valuation of the shares due to poor financial background of the companies,” added Mr Choksey.
A few companies blame the high per centage of non-promoter physical holding on incorrect classification of promoters and public shareholders in the shareholding data. Auto ancillary company Subros is one example in which non-promoters hold 59% of their shares in the physical form, according to filings with the BSE .
Explaining the reasons behind the high per centage, Subros company secretary Vikas Sabharwal told ET: “While Indian promoters own a 40% stake, two Japanese shareholders continue to hold 26% in the physical form. The latter are classified as the public and so the per centage is high,” adding, “The pure public holding stands at 34% out of which a good 25% per centage points is in the demat form.”
