Patanjali Foods shares fell over 5 per cent on Thursday’s trade after stock exchanges froze 29.26 crore shares of Patanjali for not complying with the regulator’s minimum public shareholding norms within the stipulated deadline.
Patanjali Food's locked in 5 per cent lower circuit even after management assures on complying with promoter share norms
Patanjali Foods shares fell over 5 per cent on Thursday’s trade after stock exchanges froze 29.26 crore shares of Patanjali for not complying with the regulator’s minimum public shareholding norms within the stipulated deadline.
The company said that they received an email during the exchange filing on Wednesday from the BSE and NSE regarding the freezing of 21 promoter entities. The public shareholders held on 19.18 per cent stake in the company, while the norms suggest that the listed company should have public shareholding of at least 25 per cent.
What Is Minimum Public Shareholding Norm?
As per the latest update by SEBI (Securities and Exchange Board of India), the norms require public shareholders to own a minimum of 25 per cent stake in a listed entity. The regulator has allowed the promoters and promoter group entities to sell shares to exchange traded funds to meet public shareholding norms. These provided promoters are selling a maximum 5 per cent of the paid-up equity share capital of the listed entity.
What Happens Now?
The shares freeze will remain in effect till the company Patanjali Foods achieves the stipulated public shareholding, said Patanjali.
Issuing a clarification to the stock exchanges, Patanjali Foods Limited gave an assurance that the promoters are also working on their compliance. "We have received a communication from our promoters that they are fully committed to the mandatory compliance of achieving minimum public shareholding and they have been discussing various modes best suited for increasing the public shareholding. They are confident of achieving mandatory MPS within next few months," the company said.
As per the SEBI norms, the company will have three years to bring the public shareholding to 25 per cent. The promoters of Patanjali Food’s are confident of achieving the minimum public shareholding within next few months.
They also added that the promoter’s equity shares are already locked in till April 2023 as per the SEBI norms, and none of the shares were pledged, as per Reuters report.
How Can The Minimum Share Holding Be Achieved?
The minimum public shareholding can now be achieved by allocating shares to employees through the Employee Stock Option Plan. The only mandate is that market regulator’s Sweat Equity regulations are followed. This is subject to a 2 per cent equity share limit, with a caveat that no shares are allocated to the company’s promoters.
Patanjali Ayurved, the Baba Ramdev’s firm, acquired Ruchi Soya Industries in 2019 and renamed it as Patanjali Foods in 2022.