New Delhi: Azim Premji, chairman of Wipro Ltd, could mop up around Rs4,331.52 crore based on current prices by divesting an around 4.52% stake in the company.
Choices galore: Azim Premji has several options to meet the new ruling, of which selling a part of his stake in Wipro seems the most likely. Hemant Mishra / Mint
Premji’s 79.52% holding in Wipro, the country’s third largest information technology (IT) firm, has to be pared to 75% to meet the government’s recent directive to listed companies to have a minimum public shareholding of 25%.
A company spokesperson said Wipro is studying the implications of the directive and will take a decision in a few days.
On Monday, Wipro’s shares closed at Rs652.70 on the Bombay Stock Exchange (BSE), down 0.4%. The exchange’s bellwether Sensex index lost 336.62 points, or 1.97%, to close at 16,781.07.
Premji has several options to meet the new norms, of which selling a part of his stake in Wipro seems the most likely, said an analyst with a brokerage firm, who asked not to be named. “Wipro is more likely to sell shares in the secondary market as it doesn’t need to raise cash, in which case it would have gone for a rights issue,” he said.
“The company could also go for a fresh issue of shares, which should dilute the promoter shareholding,” said an analyst with IIFL, the institutional equities division ofIndia Infoline Ltd. He, too, requested anonymity.
The proceeds from a stake sale in Wipro could also go to Premji Invest, the billionaire’s personal investment firm, the analyst added.
Another option for Premji is to sell his shares in the form of American depositary receipts (ADRs), which would give him a huge premium over the domestic share price.
Analysts said the domestic market may not have the appetite to shell out much money in the current volatile phase, and ADRs would be the best bet.
The current float of depositary receipts of Wipro, which is also listed on the New York Stock Exchange (NYSE), is 1.65%. At 8.45pm on Monday, its ADRs were trading at $20.31 (Rs960.66), down 1.5%.
“Any of the options exercised will not have an impact on the price of shares listed on the domestic bourses,” said Nimish Joshi of CLSA Research. But another round of ADRs could bring parity in the price of Wipro’s shares trading on BSE and NYSE, he added.
“At the NYSE, there is always a shortage of stock available. With more liquidity on the NYSE, the price could be moderated,” said the IIFL analyst.
Among the top 10 Indian IT firms, apart from Wipro, only Oracle Financial Services Software Ltd will have to divest stakes to meet the minimum 25% public shareholding norm.
Promoter shareholding in Oracle Financial Services Software is around 80.47%.
Among mid-tier IT companies, firms such as MindTree Ltd and 3i Infotech Ltd have public shareholding of at least 50%. Others such as Tech Mahindra Ltd have increased public shareholding in their firms gradually over the past year to above 25%.