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