Low prices prompt promoters to raise stakes

Several promoters have been steadily raising stakes in their companies since January this year. The aim is to take advantage of low share prices and good growth prospects of the businesses they operate in.

Some leading companies in which promoters or their group companies have raised stakes since the beginning of this year include Tata Motors, whose shares have been bought by Tata Sons. GMR Infrastructure’s promoter, GMR Holdings, has been regularly buying shares from the open market. Godrej Investment, one of the promoters of software firm Geometric, has also been a regular buyer.

Some other companies in which promoters have raised stakes are Indiabulls Real Estate, Max India, Man Industries, Edelweiss Capital, KCP Sugar and Himatsingka Seide.

Market players and analysts see this as an indicator of low valuations of these companies. “Many of these companies’ promoters are taking advantage of low prices. Promoters use low valuations to strengthen their holdings,” said Alok Agarwal, head (research & advisory), Fortune Financial Services (India).

Analysts said many companies in which promoters had been raising stakes had high growth prospects for the next few years.

“The markets are still below their all-time highs of 2008. A number of stocks are also below their all-time highs. The buying of shares by promoters may also be due to the fact that they are now more confident about the economy and their respective businesses,” said Jigar Shah, head of research at KIM ENG Securities India.

The shares price of Indiabulls Real Estate is down from its peak of Rs 800 in early 2008 to Rs 168, GMR Infrastructure is down to Rs 58 from its all-time high of Rs 130, while Edelweiss Capital is down to Rs 431 from its all-time high of Rs 1,750.

“Promoters get shares from the market easily as there is lack of interest among participants (in these stocks),” said Rahul Rege, business head (retail), Emkay Global Financial Services.