Promoters hike stakes in 2 out of 5 cos in 2008-09

Take advantage of the sharp decline in share prices witnessed in 2008.


S. Hamsini Amritha

BL Research Bureau When the foreign institutional investors were busy selling in the equity markets for the better part of last year, promoters weren't exactly sitting idle.

A study on S & P CNX 500 companies indicates that two out of every five companies have witnessed an increase in promoter holding over the year ended March 2009. Equity holdings as of March 2009 are available for 484 of the CNX 500 companies.

Making use of offers

It has not always been open market purchases. More often than not such increases in promoters' stake have come about through rights offers where they ended up subscribing to shares of entitlements surrendered by other shareholders.

Take the instances of Hindalco and Tata Motors. Promoters ended up increasing their holdings from 31 per cent to 36 per cent and 33 per cent to 47 per cent respectively, to ensure that the rights issue was fully subscribed.

A number of open offers that came through in this period also increased the promoter holding, especially the stakes held by foreign promoters.

Ranbaxy-Daiichi Sankyo and UTV-Walt Disney are two such prominent open offers where foreign promoters increased their shareholding to obtain controlling majority in the companies.

Japanese pharma major Daiichi Sankyo, increased its stake to 64 per cent by way of open offer after acquiring the 34 per cent share holding from Ranbaxy's promoters.

In the case of Walt Disney, it held 32 per cent equity interest in UTV Software as of March 2008.

Through the open offer route, the former increased its interest to about 51 per cent in the latter.

Most promoters took full advantage of the sharp decline in share prices witnessed in 2008.

Price advantage

They increased stakes in their companies, when the prices were tumbling down and in a sense this instilled some faith in the investors, as well as helped the stock prices recover from their respective lows!

Promoters of Mahindra and Mahindra steadily pumped up their holdings from 22 per cent to 29 per cent between April 2008 and March 2009, when its share price plummeted from Rs 695 to Rs 383 in this period.

This exercise is evident even in cases of Essar Shipping, Era Infrastructure, Zandu Pharma and Gitanjali Gems, where promoters hiked their holdings by about 20-30 per cent, constantly throughout the year.

Reducing stakes

However, the period also promoters' shareholding decline in 128 companies.

From Rs 116, in October 2008 Unitech's prices declined to Rs 34 by March 31, 2009 as promoters offloaded their stake to mitigate the liquidity crunch.

Companies such as Akruti City, Fortis Healthcare and Reliance Power have also witnessed 5-10 per cent decline in promoter stakes.

Promoters' holdings appear to have stabilised during February and March 2009, which coincided with the abatement of the relentless fall in stock prices witnessed till then