Biggies exited Deccan stock ahead of debacle

LIC, small investors continue to hold significant stakes

Institutional holdings in the Hyderabad-based media company, Deccan Chronicle Holdings, had dropped to an all-time low in the run-up to the recent collapse, data from the exchanges show.

The number of small shareholders had risen five times in the past five years. Therefore, when the stock saw a steep fall over the past two weeks, some 40,000 shareholders with holdings of less than Rs 1 lakh each were the worst affected. Life Insurance Corporation (LIC), which holds some 12 million shares, is also likely to be sitting on some notional losses.

Lack of institutional support has led to a steeper fall in the prices, experts said. From a high of owning a little over 35 per cent of the company between themselves in mid-2007, mutual funds (MFs) and foreign institutional investors (FIIs) now own less than two per cent in it.

According to the latest shareholding pattern filed by the company, as of June 30, just two MF schemes owned 0.59 per cent. Similarly, 28 FIIs own 1.11 per cent in all. Other financial institutions own a little over one per cent. On the same date, some 39,923 shareholders together owned 7.52 per cent in the company, up from 7,000 investors holding 1.28 per cent at the end of 2006.

This is in sharp contrast to the sunnier days when the stock attracted huge institutional interest. Almost every fund house wanted a piece of the action. Some of the top global and Indian funds had taken significant stakes. Large funds that held over one per cent of Deccan Chronicle stock in 2006-09 included Fidelity domestic and offshore funds, Morgan Stanley, ICICI Prudential Emerging Star, ICICI Prudential Multicap, HDFC Prudence, Deutsche Equities, Franklin Templeton, Merrill Lynch India, Birla Sun Life, Mirae Asset, BlackRock, Reliance Capital and Emerging Market LLC.

The combined holding of domestic MFs peaked at the end of December 2006, when some 30 funds together held 18.67 per cent. Around 20 FIIs held 10.67 per cent, taking the total institutional stake to 29.34 per cent at the end of 2006. This latter holding peaked at 35.26 per cent in June 2007, when 111 investors together owned this much. This comprised 57 MFs, which held 16.59 per cent and 54 FIIs with 18.67 per cent.

While the institutional share has been falling over several quarters, the fall was steeper after the merger of Deccan Chargers, the cricket venture and Odyssey, the book store business, with the listed company. Several investors exited when it offered a buyback programme at Rs 180 per share.

LIC has played a contrarian game. From 1.4 per cent in March 2008, the insurer’s stake rose to 2.02 per cent in December 2009, 2.11 per cent in December 2010 and 5.92 per cent in December 2011. As of end-June, three schemes of LIC, the main fund (2.45 per cent), LIC Market Growth Plus (1.86 per cent) and LIC Profit Growth Plus (1.61 per cent) together owned 5.92 per cent.

The Deccan Chronicle shares hit the upper circuit on Monday, gaining 4.8 per cent at Rs 14.20.