Shares in demat form must for promoters

Market regulator Sebi on Friday said that the promoters of all the listed companies in India should dematerialize their holdings fully by September 30, 2011. Failing which, a Sebi notice said, the scrip will be shifted to tarde-to-trade segments of the bourses.

"In order to further promote dematerialization of securities, encourage orderly development of the securities market and to improve transparency in the dealings of shares by promoters including pledge / usage as collateral, Sebi, in consultation with stock exchanges, has decided that the securities of companies shall be traded in the normal segment of the exchange if and only if, the company has achieved 100% of promoter's and promoter group's shareholding in dematerialized form latest by the quarter ended September 2011," the Sebi notice said.

Market players said the step would help contain the fraudulent use of promoters' shares in the market, including pledging of physical shares by the promoters to raise funds but not reporting the same to the exchanges. As of now, rules require that any pledging of shares by the promoters need to be reported to the bourses.

Brokers also said that in some of the PSUs , the government of India still holds shares in the demat form and after the Sebi order, these shares will need to be dematerialized. For example, in Hindustan Copper, which is expected to go for a round of divestment, the government holds 99.6%. Of these about 10.6% is held in the demat form, shareholding data on the BSE website showed. The balance 80% in HCL is held in the physical form by the government. (Times of India)