Strategic stakes in listed firms for sale

Major shareholders of many publicly quoted companies are trying to reduce their holdings primarily for capital gains and to build the firms’ capital base, industry sources said.

The sources said that increasingly large owners of listed companies are realizing that it doesn’t make business sense to hold more than 51 per cent in a firm. “In any case they are the major shareholder. Owning – say 75 per cent – doesn’t make any sense for a shareholder who has 51 per cent, because the balance ownership doesn’t give him more power. This is why most want to divest,” an analyst explained. On the other hand, if it’s a good firm, some investors don’t mind claiming strategic stakes, according to the analyst. “For most large shareholders it’s either hold 100 per cent (If they own more than 75 per cent) and delist the entity or reduce the holding to 51 per cent.”

He added that this way fresh capital could also be brought into the company. Most listed insurers are trying to divest stakes in a bid to raise capital, according to analysts.

“They have minimum capital adequacy requirement and this is a good way to raise that cash,” a second analyst said. He added that a large insurer’s 30 per cent stake is currently being negotiated with a foreign fund. Many stakes in manufacturing firms, finance firms, etc are also being discussed, the analyst added.

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