The market regulator has included the names of these six companies in the compulsory list of demat trading by institutions, thereby forcing them to sign up with the depository before October 15. After that date, the institutions will be able to deal only in demat shares of these companies.

The six companies, forming part of either of the two leading indices, the Nifty and the Sensex, are Nestle, Colgate-Palmolive, BHEL, EIH Ltd and two Tata group companies, Andhra Valley Power and Tata Power.

According to sources, the depository and the regulator had received requests from shareholders of these companies seeking the option of being able to dematerialise their holdings in these scrips.

The Sebi core group, at its meeting last Friday, decided that all these companies should be included in the list of securities where institutions --including FIIs, mutual funds, banks and OCBs -- have to compulsorily trade in the demat segment. Since it is binding on a company to provide the demat option to investors if this was sought, this decision effectively forces these companies to sign up with the National Securities Depository Ltd (NSDL).

This is the first time Sebi has included in the compulsory list companies which were yet to sign up with NSDL. Depository sources revealed that the six companies, including Nestle, which had earlier refused point-blank to provide the demat facility to investors by signing up with NSDL, have now come around and are hopeful of signing up with the depository before the October 15 deadline.

"These are all top companies and are part of either of the two top stockmarket indices. By virtue of this they have large acceptance among investors. ``For some unknown reason they had been dragging their feet (on joining NSDL). We have, therefore, decided to put them on the compulsory demat trading list for institutionswhich will automatically lead to them signing up," said a member of the Sebi core group on depositories.

"We are keen that at least the top companies give a thrust to the depository movement considering that they themselves stand to gain by this. Once these companies have signed up, all Nifty and Sensex companies would be in the demat mode," the member added.

Sebi sources pointed out that at the time of drafting the Depositories Act, the government had felt that the investor should be given the option to hold a share in the physical or demat form.

This was initially interpreted to mean that those who wanted to hold paper could do so. But technically this implies that even if one shareholder of a company desires to hold his shares in demat form, the company must provide him the option, said a Sebi source. It is learnt that Sebi chairman DR Mehta, who was present throughout the meeting of the core group headed by Sebi executive director Pratip Kar, was insistent that as many companies as possible shouldbe brought within the depository fold and that too at the earliest.

It is learnt that there might well be another list of securities announced for compulsory demat trading for institutions before the end of the year. This will far outstrip the Sebi target of 100 companies by the end of the year, as by October 15 there would be 110 companies in the compulsory demat trading mode.