MUMBAI, Dec 23: A fairly small percentage of dematerialised shares of State Bank of India is expected to be available in the market by January 15 - the Securities and Exchange Board of India (SEBI) & bi-stipulated deadline for trading in demat shares by institutions - as several FIIs and domestic institutions have only now started sending their shares for transfer in their names.

The shares have been held all along by the institutions in street names. To be able to dematerialise shares, institutions must necessarily hold them in their own names first. An estimated 20,000 shares have been coming in for transfer each week for the past 2-3 weeks, registrars say.

In the case of SBI, currently, less than three per cent of the total equity has been dematerialised. What is startling, however, is the fact that out of the 18-lakh share certificates owned by institutional investors, which include FIIs, FIs, mutual funds and banks, only 70,000-odd share certificates have been dematerialised till December 15.

And even though shares are being sent in chunks for transfer by institutions, by the time all the shares are dematerialised, the January-15 deadline would most certainly be crossed, feel market sources.

This is because it takes about 30 days for a share to be transferred to an investor's name. The shares will then be returned by the registrar to the custodian. A fresh request for dematerialisation of these shares would then be made to the depository participant. After this is done it would take about 15 days for the share to be dematerialised and eligible for trading.

"The deadline is barely 23 days away. We were banking on a flood of demat requests before the fund managers go for their Christmas break. But all we have received are transfer requests. Institutional investors in this scrip are bound to face a liquidity squeeze for a few days after January 15, after which they would be able to trade only in demat shares of SBI," said a market source.

However, the market regulator has reiterated that there is no question of relaxing the January 15 deadline even if it means a temporary liquidity squeeze for the institutions.

"The deadline stays. Institutions would have to trade only in demat shares after January 15 in the eight shortlisted securities," said Pratip Kar, Sebi executive director.

Depository sources said that it is not necessary for institutions to have their entire stock dematerialised before January 15 as they do not trade their entire holdings in a day.

Market sources however said that given the huge gap between the total shares held by these investors and the number that has actually been dematerialised, institutions are likely to face some difficulty initially.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.