Promoters use bear market to tighten their grip

Shareholding Pattern For The September Quarter Shows Promoters Raising Substantial Stakes In Several Cos

THE battering of stocks over the past few months may have left many investors unnerved. But not the promoters of Indian companies, it appears. Some of them have used the recent downswing in stock prices as an opportunity to mop up shares of their firms cheaply to enhance their holdings in the company. The stock prices of many companies are ruling at a value of less than one-fourth of their peak in January.
    The shareholding pattern for the quarter ending September 2008 shows that in several companies, promoters have raised their stakes substantially. Even though it is hard to find big names, several promoters of mid and small-cap companies have hiked their stakes ranging from 1-20% during the September quarter compared with the previous quarter.
    Some of the names include Entegra, Mafatlal Finance, GEI Industrial Systems, California Software, NDTV, House of Pearl Fashions, Orchid Chemicals, Uttam Galva, Philips Carbon, Granules India, Gateway Distriparks and Aarti Industries.
    With stocks of many companies now on offer at significantly lower rates, way below their peak levels in January this year, more promoters are likely to take either the creeping acquisition or the buy-back route to bolster their holdings, says an analyst. Further, some of them may use open market purchases to buy from the market, depending upon liquidity in the counter and access to funds.
    In some cases, promoters are raising their stake to ward off potential takeover threats. Take the case of Orchid Chemicals, where promoters have raised their stake to over 21% from around 16% in the last quarter.
    Other instances recently where promoters or promoter groups have mopped up shares from the secondary market include Holcim of ACC, the Sheths of GE Shipping and Biyanis of Pantaloon Retail.
    Some promoters have, in fact, been so aggressive that they have bought close to 5% stake in their companies, almost exhausting the creeping acquisition limit, which provides for a promoter to buy up to 5% equity annually, subject to a ceiling of 55%.
    "Some promoters trying to make the best out of depressed stock prices, by buying at lower levels in the choppy market. They are buying large quantities of beaten-down shares with the intention of increasing their holding in their companies," a market observer said. Though it is difficult to say whether the market has bottomed out, analysts say short-term price fluctuations should not deter promoters from hiking their stake if they feel that valuations are attractive. They add that the sentiment continues to be negative, given domestic cues and uncertain global markets. Global cues are not in favour of the market even as liquidity concerns continue to loom large on corporates apart from the fear of slowdown in growth globally.