1. Yes, But with Limitations

• A Public Limited Company can hold physical shares of other companies, especially unlisted or private companies whose shares are not dematerialized.
  
• However, for listed companies, shares must be held in dematerialized form, as per SEBI regulations.
  
• The holding of physical shares is not prohibited, but it is discouraged and heavily regulated, especially for transfers.

2. SEBI Regulations on Physical Shareholding

• As per SEBI notification dated April 1, 2019, transfer of listed shares in physical form is not allowed (except in cases of transmission or transposition).
  
• Listed Public Limited Companies must dematerialize their shareholdings to execute any transfer or sale.
  
• Shareholders of listed entities must convert physical shares to DEMAT before selling or transferring them.

3. Holding Physical Shares in Unlisted Companies

• Public companies may hold physical share certificates of unlisted companies, as these companies may not be linked with depositories.
  
• Such holdings are valid but must be properly recorded and safeguarded, and reflected in the company’s register of investments.
  
• If the unlisted company opts for dematerialization, the holding public company must initiate conversion to DEMAT.

4. Accounting and Record-Keeping Obligations

• Physical shares held must be recorded as non-current investments in the company’s books of accounts.
  
• Details such as certificate number, folio number, number of shares, and face value must be maintained.
  
• The company must ensure that title documents are secure and accessible for audit and inspection.

5. Preference for Dematerialization

• For ease of transfer, risk reduction, and regulatory compliance, companies are strongly encouraged to dematerialize physical shares.
  
• Demat shares allow better control, faster transactions, and clear ownership tracking.
  
• SEBI and MCA continue to push toward full digitization of securities in both listed and unlisted public companies.