Promoters make hay in bull market

Promoters of around 200 large- and mid-cap companies have sold parts of their holdings to raise a combined Rs 50,000 crore in the second quarter of this financial year (July-September), according to the shareholding pattern filed by these companies with stock exchanges.

The reason is obvious: Both the benchmark indices have almost doubled from their March 2009 levels. The reasons for the stake sales vary from meeting their company’s working capital requirements to debt repayment. A few did so for business expansion.

The list of companies includes Infosys Technologies, TCS, Reliance Communications, Mahindra and Mahindra, Idea Cellular and Crompton Greaves.
 

GAINS GALORE
	Shares in mln	Amount Rs crore
Reliance Ind	15.00	3187.50
JP Associates	50.49	1204.28
TCS	15.07	765.07
Suzlon Energy	69.97	677.74
M & M	4.38	375.06
Infosys Techno	0.80	177.00
AIA Engineering	4.33	113.39
Dabur India	5.27	69.07
Nagarjuna Const	3.19	43.87
Godrej Cons	2.00	43.14
Shares sold between July and Oct, 09 Source: BSE/NSE

The latest in the list was N R Narayana Murthy, co-founder of Infosys Technologies, who offloaded 800,000 shares for Rs 177 crore. Murthy’s holding in the company has fallen to 0.41 per cent from 0.55 per cent. Murthy will use the money to start a venture capital fund for young entrepreneurs.

TCS promoters Jamsetji Tata Trust and Navajbai Ratan Tata Trust collectively sold 15 million shares (0.77 per cent) for Rs 765 crore. The total promoter holding in the company has declined to 74.32 per cent from 75.09 per cent. The promoters might have sold the stake in the group’s biggest company by market cap to help refinance a $2-billion bridge loan taken by Tata Motors.

Enam Securities Head-Broking Dharmesh Mehta said the promoters might have sold shares to reduce their leveraged positions and pledge levels, which is a very good sign. Some analysts also believe that promoters preferred to remain in cash, which can help them in case tough times come back.

The promoters of Mahindra and Mahindra have sold an aggregate 4.36 million equity shares amounting to Rs 354 crore.

Reliance Capital (1.02 million) of Reliance Communications, IGH Holdings (2.49 million) of Idea Cellular and Sovotex Textiles (3.12 million) of Bank of Rajasthan have sold more than a million shares each in their companies during the quarter.

In September 2009, Reliance Industries, Suzlon Energy, Cipla and Jaiprakash Associates raised Rs 5,728 crore by selling part of their treasury stake in the open market through block deals.

Among mid-cap companies, promoter stakes in Great Eastern Shipping, Piramal Healthcare, Godrej Consumer Products, Koutons Retail, Vishal Retail, Upper Ganges Sugar and Oudh Sugar Mills declined in the range of one per cent to two per cent.