Why Do Some Banks Show 0% Promoter Holding? Explained

The primary reason is often due to a merger. For example, let's take Ujjivan Small Finance Bank, which recently merged with its parent company, Ujjivan Financial Services Ltd. In such cases, the holding company (Ujjivan Financial Services) ceases to exist post-merger, and its shares are canceled.

Prior to the merger, Ujjivan Financial Services owned around 73% of Ujjivan Small Finance Bank. Once the merger was finalized, this promoter stake essentially disappeared. As part of the merger process, the shareholders of the holding company received shares in the new, merged entity based on a predetermined swap ratio. These shareholders are then reclassified as FIIs (Foreign Institutional Investors), DIIs (Domestic Institutional Investors), or public shareholders, depending on their profile. This explains why you may notice an increase in FIIs, DIIs, and public shareholding after such mergers.

It’s important to note that the disappearance of promoter holding due to a merger does not signal anything negative about the company. There are pros and cons to both having and not having promoters.