Listed companies to dematerialize non-promoters holdings

Mumbai: Market regulator Securities and Exchange Board of India (SEBI) has announced that to continue trading in the normal segment of the stock exchange, all the listed companies need to convert 50 percent of non-promoters holdings to dematerialized form by October 31. Companies that don't comply with the new criteria, would be shifted to the trade for trade (TFT) segment, said SEBI.

According to SEBI, stocks would be traded in the TFT segment for the first 10 days in case of mergers, capital reduction, corporate debt restructuring and securities admitted directly from another exchange, if they are traded in the derivatives segment. In the TFT segment, trades must be settled on the same day with delivery of securities.

As on June 30, 2010, a large number of companies listed on the BSE have less than 50 percent of public shareholding (excluding promoters) in the demat form. Adding to it, around 900 companies don't have even a single dematerialised share, according to ET data.

The trading partners of big companies would not be affected by the move, said Tarun Sisodia, Head of research at Anand Rathi brokerage. According to him, it is the small companies and defunct companies having a substantial portion of promoter-shares in dematerialized form that have been targeted.

Ambareesh Baliga, Vice-President, Karvy Stock Broking said that the move will help improve volumes amid wider participation of public in trading of shares. It will also encourage shareholders to open demat account which will also result in their active participation in the market, he added.
SEBI's move will help to avoid problems arising from holding shares in physical form, like mismatch of signatures, forgery of signatures and fake certificates.