THE DELISTING THEME

• The recent pronouncement by the SEBI Chief, as reported in the Press yesterday, ruling out any extension of time limit given to listed Companies to bring their Public Float to a minimum of 25%, seems to have again shifted the limelight onto the affected listed stocks.
•  Just as a recap for readers of this Blog, on JUNE 4 2010 the Government had amended the Securities Contracts (Regulation) Rules 1957 to set a limit of 25% minimum public shareholding for initial listing by companies on Indian Stock Exchanges as well as continued listing.  The last date for ensuring that the public shareholding is at least 25% is June 2013 for listed private sector companies and August 2013 for the PSUs.
• There are 181 listed private sector companies which do not meet the minimum Public Shareholding norm as above, as of now.
• Of these, the prominent ones with foreign Promoters are FRESENIUS KABI (90% foreign promoter holding), ASTRA ZENECA (90%), BOC INDIA (89.48%), ELANTAS BECK (88.55%), KENNAMETAL (88.16%), FAIRFIELD ATLAS (83.91%), ENEOS ABS (83.33%), BLUE DART (81.03%), ORACLE (80.39%), TIMKEN (80.02%), SHARP INDIA (80%), SINGER (78.9%), THOMAS COOK (77.11%), NOVARTIS (76.42%), 3M INDIA (76%).
• As most of you would be aware, the Market perceives that the foreign promoters of at least some of these above listed companies would perhaps prefer to delist rather than dilute their shareholding to below 75%. It is further felt that such moves to delist would be at a substantial premium to the secondary market price. The most bandied about example is that of the recently delisted ALFA LAVAL where the final price during the delisting process shot up more than 300% .
• Even though the decision to whether delist or not does not follow any set paradigm but on the basis of empirical conception it is speculated that the following companies would be prime candidates: FRESENIUS KABI, BLUE DART, INEOS ABS, ORACLE, TIMKEN, 3M INDIA, ELANTAS BECK.
• Accordingly, the Market being what it is, the run up in the past year in these companies has been very sharp as follows:
• FRESENIUS KABI (up 54% in the last year, 49% in the last six months)
• BLUE DART ( up 52% in the last year, 37% in the last six months)
• INEOS ABS (up 53% in the last year, 27% in the last six months)
• ORACLE (up 28% in the last year, 31% in the last 6 months)
• TIMKEN (up 33% in the last year, 14% in the last 6 months)
• 3M INDIA (up 18% in the last year, 19% in the last 2 weeks)
• ELANTAS BECK (up 69% in the last year, 51% in the last 3 months)
• KENNAMETAL ( up 92% in the last year, 14% in the last week)
• Of course, the success of any possible delisting attempt would also depend upon the nature of the balance shareholding and the intent and amenability of the big / institutional shareholders, if any, and thus would have to be taken up on a case by case basis.
• But, short point is that as the June 2013 deadline inches closer, these abovementioned stocks  certainly provide a relatively risk free opportunity with good possible upsides for investors willing to take a bit of a chance and hold for another year or so.