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Sunday, October 31, 2010

SEBI Guideline: 50% of Public holding in Demat


Market regulator the Securities and Exchange Board of India (Sebi) said that only shares of those companies would be allowed to trade in the normal segment where at least 50% of non-promoters holdings are in the dematerialised form by October 31. 

The regulator has asked stock exchanges to shift all companies that don’t comply with this requirement to the ‘trade-to-trade’ segment, commonly known as ‘T’ group. Only delivery-based trades are allowed in ‘T’ group stocks; traders can’t square off their positions intraday. This affects trading volumes as participation is lower when there is no scope for intraday buying and selling of shares, say brokers. 

According to ET data, 1,541 companies listed on the BSE have less than 50% of their public shareholding (excluding promoters) in the demat form, as on June 30, 2010. Hind Zinc, Jaybharat Textiles , Vippy Inds,Balaji Distilleries , Lanco Inds , Nissan Copper , Nissan Copper, Indian Metals, Subros and Panchmahal Steelare a few notable examples of fundamentally sound companies where more than half of non-promoters’ holding is in physical form even 14 years since demat was introduced. 

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Let us look at the recommended stocks and their public shareholding in demat.. If the public holding is below 50% in demat then the shares will automatically be in Trade to Trade with 5% circuit limit and no intra-day squaring off of positions and lower volumes..
We have public shareholding in demat form for Sept 2009 and Sept 2010 for reference.






As we can see Regency and Superhouse will be in Trade to Trade with 5% trading band starting Nov 2010
Also What can we deduce from SKM Egg .. the public shareholding has increased from 44.5% to 56.88%
while stock price has fallen and promoter shareholding has fallen. SKM has made the cut..


As far as GAEL is concerned.. the public shareholding has been consistent even as promoters have been increasing stake.
- This I think is the reason why promoters are buying small lots.. 
- Promoters are working hard to get physical shares dematerialized 
- Then the promoters are buying the similar amount of shares from the market maintaining the demat % above 50%




This can also be deduced from the fact that the first 2 pages of the annual report is dedicated to de-materialization procedure.. clearly indicating the promoter interest in getting the physical shares dematerialized.


=happy investing 



4 comments:

Srinivas said...

Hi Prahalad,

I chanced upon your blog yesterday and am highly impressed with your approach to stock picking and stock sticking strategy. I have forwarded your link to my circle of friends / investors.
Could you please let me know your views on two stocks : "Financial Technologies" and "Tide Water Oil".

Thanks,
Srinivas

What'sUp Prahalad said...

Srinivas:

Financial Technologies is fairly priced.. yes it has equity in various exchanges and if they do turn out to be major exchanges.. then they can generate regular revenue streams..

As far as Tide Water oil.. is concerned.. If you are looking for lubricant business donot look further than Jayant Agro which provides basic material "sebacic acid"


=happy investing
whatsup-indianstockideas.blogspot.com

Srinivas said...

Thanks Prahalad !

Since you specialise in agri stocks (Jayant, IFB agro, GAEL), could you please give your opinion on JK Agri Genetics. The stock price is on steroids but the fundamentals do not seem to justify...

Thanks,
Srinivas

What'sUp Prahalad said...

Srinivas:

Since JK Agri Genetics is on steroids .. Its a clear avoid..

There are investment styles..
- Value
- Growth

so the Growth style would love JK Agri genetics.. but Value would be apprehensive.. I think the future value is already being discounted.. while in case of GAEL and Jayant the present and past has not been even discounted providing deep value.. even if GAEL and Jayant maintain their current development path's..

=happy investing
whatsup-indianstockideas.blogspot.com