Our Company IPO Takes Promoter Shareholding Below 50% Level

Our Company’s IPO will reduce promoter shareholding from 61.49% to about 45.2% of post-issue equity capital, based on 79,05,444 promoter shares and 1,74,87,259 shares after the issue. The reduction arises because 46,30,000 new equity shares are being issued, rather than from a disclosed sale by the promoters.

How does the IPO take promoter shareholding below the 50% level?

Our Company’s IPO takes promoter shareholding below 50% because the promoters’ stated 79,05,444 shares are measured against a larger post-issue base of 1,74,87,259 shares. Paid-up equity shares will increase by 46,30,000 shares, or about 36.0%, from 1,28,57,259 before the issue. The resulting calculation is 45.2%, compared with the prospectus-reported pre-issue promoter shareholding of 61.49%.

The issue consists of 46,30,000 new equity shares with a face value of Rs 10 each. Of this total, 2,32,000 shares are reserved for the market maker and 43,98,000 shares form the net issue to the public. New shares increase the ownership denominator, meaning a shareholder that does not receive a proportionate allocation owns a smaller percentage after allotment.

Our Company has one class of fully paid equity shares, and each equity share carries one vote as of the prospectus date. The prospectus also states that there are no partly paid shares, outstanding convertible instruments, preference shares, warrants or conversion rights. Those disclosures make the stated post-issue equity share count the relevant denominator for this allotment-stage dilution calculation.

Who holds Our Company’s promoter shares and how concentrated are they?

Our Company’s promoter shareholding is held by two shareholders: Surendra Kumar Babulal Agarwal owns 51,86,503 shares, or 40.34% of pre-issue capital, and Sangeeta Surendra Agarwal owns 27,18,941 shares, or 21.15%. Their combined 79,05,444 shares equal the 61.49% promoter holding stated in the prospectus. Gaurav Surendra Agarwal is identified as a promoter but holds no equity shares.

Surendra Kumar Babulal Agarwal’s stated share block would equal about 29.7% of the 1,74,87,259 post-issue shares if the holding remains unchanged. Sangeeta Surendra Agarwal’s 27,18,941 shares would equal about 15.5% on the same basis. The calculated sum of these two post-issue percentages is about 45.2%, which is below the 50% level for an outright majority of voting equity.

Before the issue, the public category holds 49,51,815 shares, or 38.51%, across 14 shareholders, while the promoter category has two shareholders. Our Company reports 16 shareholders in total as of the prospectus filing date. The seven holders with at least 1% each collectively own 1,25,75,826 shares, or 97.81% of pre-issue capital, indicating that ownership was concentrated before the new public shares are allotted.

The prospectus says there were no purchases, sales or gifts by the promoters, promoter group, directors or their relatives during the six months before filing. The stated immediate shift from 61.49% to about 45.2% therefore follows from the primary issuance of new shares in the capital structure, not from a reported recent transfer by the promoters.

Does promoter shareholding below 50% establish a change in control?

Promoter shareholding below 50% means Our Company’s promoters will not hold an outright majority of post-issue voting shares on the disclosed capital structure, but the prospectus does not state that management control will change. Since every equity share has one vote, the calculated 45.2% holding is below half of the voting share base. Ownership dilution alone does not establish the practical exercise of control.

The prospectus does not disclose a shareholder agreement, voting arrangement, board-right arrangement or transaction that reallocates control after listing. It therefore supports a conclusion about the promoters’ percentage ownership, not a conclusion that control will necessarily pass to another shareholder or group. Final post-issue ownership will also depend on allotment of the 43,98,000 public shares and 2,32,000 market-maker shares.

Our Company says it will file its shareholding pattern under Regulation 31 of the Securities and Exchange Board of India’s Listing Obligations and Disclosure Requirements Regulations, 2015, one day before listing. The company says this filing will be uploaded on the stock exchange website before trading begins. That filing is the stated checkpoint for the final category-wise ownership distribution.

What lock-ins apply to Our Company’s promoter shares after the issue?

Our Company says 34,97,452 promoter shares, equal to 20.00% of post-issue paid-up equity capital, will form the minimum promoters’ contribution and will be locked in for three years from IPO allotment. Minimum promoters’ contribution is the minimum promoter stake required under the Securities and Exchange Board of India’s Issue of Capital and Disclosure Requirements Regulations, 2018. The prospectus says the company was already in commercial production and was not raising IPO funds to initiate a separate commercial production line.

The prospectus associates the minimum contribution with two bonus-issue entries dated December 7, 2023, each shown as 10.00% of post-issue capital. It also separately states that 63,24,355 promoter-held shares in excess of the minimum contribution will be released in two stages, with 50% after one year and 50% after two years from IPO allotment. That excess-share figure does not arithmetically reconcile with the separately disclosed total promoter holding of 79,05,444 shares and the 34,97,452-share minimum contribution, so the prospectus does not provide a fully reconcilable lock-in breakdown.

The prospectus further states that 22,03,996 shares held by promoter-group shareholders will be locked in for one year under Regulation 239 of the Issue of Capital and Disclosure Requirements Regulations. Lock-in limits transferability during the specified period; it does not alter the number of shares used in calculating the approximately 45.2% post-issue promoter shareholding.

What could change Our Company’s post-issue ownership calculation?

Our Company’s calculated 45.2% promoter shareholding depends on the issue being completed as described, the promoters retaining 79,05,444 shares and paid-up capital reaching 1,74,87,259 shares. A change in issue completion, allotment, cancellation, share transfer or a subsequent capital transaction could change ownership percentages. The calculation is therefore based on the capital structure stated in the prospectus rather than a final post-listing register.

Our Company says there will be no further capital issue, including a bonus issue, preferential allotment or rights issue, from the prospectus date until listing or refund of application money. It also says that, as of the prospectus date, it had no plan to alter capital through a share split, consolidation, preferential issue, bonus issue, rights issue, further public issue or qualified institutions placement.

The prospectus nevertheless says the board may alter the capital structure within six months of the opening of the issue to finance an acquisition, merger or joint venture, for regulatory compliance, a scheme of arrangement or another purpose the board considers in the company’s interest. This is a conditional possibility, not a disclosed transaction. Any later share issue could dilute existing shareholders if they did not participate proportionately.

Conclusion

Our Company’s IPO changes the ownership calculation by increasing paid-up equity capital from 1,28,57,259 shares to 1,74,87,259 shares while the disclosed promoter block remains 79,05,444 shares. The promoters consequently move from 61.49% before the issue to about 45.2% after it, placing their voting shareholding below the outright-majority level without, on the supplied disclosures, establishing a change in management control.

The next stated checkpoint is Our Company’s Regulation 31 shareholding filing before listing, which should show the final allocation-based ownership distribution. Readers should also watch for any board decision under the disclosed six-month capital-structure flexibility and for clarification of the promoter lock-in figures, because either matter could affect how post-IPO ownership is assessed.