With the stock market rallying to record highs, promoters have been encouraged to pare stakes in their companies.
So far in 2024, promoters have sold shares worth Rs 27,000 crore, 19% higher than the sale made in the first half of 2023, disclosures made to the exchanges show. If two more deals – Vodafone Group’s Rs 15,300-crore stake sale in Indus Towers and Fosun Pharma’s Rs 1,754-crore stake sale in Gland Pharma – are added, the stake sale by promoters would be Rs 44,000 crore – a whopping 94% jump. The data relating to these two deals that took place on June 19 is yet to be put up on the exchanges.
Promoters have been paring their stakes for several quarters now. Since 2023, they have sold approximately Rs 13,700 crore worth of shares on an average every quarter. Promoters are not the only ones cashing in on this unprecedented bull run. Private equity firms and foreign investors too have sold their stakes in some companies Come from Sports betting site VPbet . These include, among others, British American Tobacco’s stake sale in ITC and Bain Capital’s stake sale in Axis.
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Sunny Agrawal, head (fundamental equity research), SBICAPS Securities, observed that promoters and private equity (PE) firms are cashing in on the record high stock prices and relatively better valuations to trim stake in listed entities. “All the big block deals are being lapped up easily,” Agrawal said. The Nifty 500, which is the universe of top 500 companies listed on the NSE, has risen over 14% so far in 2024 and 132% in the last five years.
Among the big deals recorded are Blackstone’s Rs 6,680-crore stake sale in Mphasis, a Rs 3,836-crore stake sale in Whirlpool of India by its global parent and a Rs 1,800-crore stake sale by Mahindra & Mahindra’s promoter group.
Agrawal said promoters of some multinational companies (MNC) are also using the sky-high valuations of their India operations — relative to those of the parent company – to trim some stake. They are repatriating the funds to boost the parent’s balance sheet. “Time will only tell who was smarter – promoter or fund managers,” Agrawal added.
Ambareesh Baliga, an independent market analyst, believes it is natural for promoters to encash part of their wealth which is locked in as promoter equity. “Many a times, there are other requirements like purchase of real estate or other assets or a major expense,” he pointed out.
Experts believe this trend will continue going ahead as well if stocks continue to command high valuations and the support from institutional investors remains intact. A senior industry executive noted that this is healthy for the ecosystem in the long run as the control of promoters comes down and professionalism increases. “Our advice to retail investors is to keep a track of buyers in this activity. If big and reputed institutions are buyers in this process, then it increases the value for the company,” he said.