Maximum Promoter Holding In Listed Companies In India: How important is the founder of a company to investors? For example, would it remove investors’ faith if Mukesh Ambani completely renounced his role in Reliance Industries?
The stock may see some volatility for a short while but eventually, it would recover. That still doesn’t change the fact that a promoter is imperative to the growth of a company.
To a lot of investors, promoter holding is a make-or-break condition for investing. Here, we’re going to talk about promoter holding, and its importance and also list out the maximum promoter holding in listed companies in India.
Who Is A Promoter?
A promoter is a person who was involved in a company from its establishment. They may or may not be employees of the organization and has a variable stake in the company. This is prior to the company going public, or even being a company itself.
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Importance Of Promoter Holding To Investors
One of the fundamentals that investors are taught to observe is promoter holding. It tells us, the overall percentage of ownership by the initial stakeholders of the company.
That reflects their belief and confidence in the company’s future. This is why a higher promoter holding is always viewed as a good sign.
The higher the promoter holding, more the confidence the promoters have in the company. When promoter holding is high, it builds the belief in investors that the company has a good future.
This is why the news is abuzz when there’s a rise in promoter holding. Additionally, promoters are insiders to the company.
They have access to new developments and business opportunities before the public, and any movement in their shareholding is indicative of this new development.
Investors must keep in mind that while a high promoter holding is good, it doesn’t mean that the stock will surely do well in the future. Promoter holding is just one factor to consider when picking stocks for investing.
Promoter Holding – High Vs Low
Promoters being involved in a company is important. Firstly because they know the company longer than any other stakeholders, including the board.
This means they understand their business and their competition, and most importantly, they know what works. This is why a high promoter holding or an increase in promoter holding is mostly taken in a positive light.
On the other side of the coin, we have low promoter holding or a reduction in promoter holding. In general, it is taken as a negative sign by investors when the promoters sell their stake in the company.
It shows that they don’t believe in the company or have confidence in its future. While this might be the case, sometimes the promoters give a reason for reducing their stake in their company.
It could be to invest in other businesses, raise capital for a new project, etc. But when a clear reason is not stated by the promoters, then it is most definitely a bad sign.
Minimum Public Shareholding – The MPS Rule
The minimum public shareholding rule states that a minimum of 25% of a listed company’s shares must be held by the public.
According to this rule, 25% of the outstanding equity shares of the company must be compulsorily held by the public. This includes retail investors such as yourself.
The term public applies to “non-promoter” shareholders. This includes FIIs, DIIs, retail investors, and more. With this rule, it became effectively impossible for promoters to own anything more than a 75% stake in their company.
The MPS rule was implemented by SEBI in 2010. According to this rule, companies that hold more than 75% stake in the company have to bring it down to a maximum of 25%, with the rest being classified as public shareholding.
However, this did not apply to PSUs, who were allowed to maintain their MPS levels at 10% until 2018. Companies that were non-compliant with this rule were initially sent notices.
But further non-compliance led to the freezing of the promoter shares and even blocked them from becoming directors elsewhere.
In 2019, the government considered imposing a 35% MPS rule, but due to poor reception and public backlash, the 25% rule still applies today.
Maximum Promoter Holding In Listed Companies In India – Table
Below is a table that shows the latest promoter shareholding of some of the biggest listed companies in India.
|S. No.||Company Name||Market Cap (Rs. In Crs)||Promoter Holding|
|1||Adani Total Gas||398065.29||74.8|
Adani Wilmar’s promoters are Adani Commodities LLP which owns 43.97% and the remaining 43.97% is held by Lence PTE Ltd, a Singapore private company.
|S. No.||PSU Company Name||Market Cap (Rs. In Crs)||Promoter Holding|
|2||Punjab & Sind Bank||20706.12||98.25|
|4||Indian Overseas Bank||56140.19||96.38|
|7||Central Bank Of India||26216.43||93.08|
|8||Bank Of Maharashtra||19955.96||90.97|
|10||Fertilisers and Chemicals Travancore (FACT)||22133.12||90|
We have reached the end of this blog covering Maximum Promoter Holding In Listed Companies In India. Promoter holding has an important role in making investing decisions.
In the decision-making process of investing, it definitely is one of the more important factors. Happy investing!
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