SME promoters step up stake buys

Three-fold jump in open market purchases of shares in own firm over January-June as compared to last year.

The promoters of mid-cap and small-cap companies have stepped up open-market purchases of shares in their own companies in the first half of the calendar year, to raise shareholding. The announcement made by 259 companies to the stock exchanges show buying of 178 million shares by promoters between January and June this year, a three-fold jump compared to those made by 96 companies in the same period last year.

Among promoters who raised their stakes by more than one per cent each are Money Matter Finance, Apollo Tyres, Indiabulls Real Estate, Radico Khaitan, Praj Industries, Dhampur Sugar, Alok Industries, Himatsingka Seide, Nitesh Estates and Ramco Industries. The promoters of Lanco Infra, GMR Infra, Landmarc Leisure, Aban Offshore, Anant Raj Industries, Gitanjali Gems and Ratnamani Metals bought significant shares from the open market.

The takeover code of the Securities and Exchange Board of India allows promoters to acquire up to five per cent of the stake in any year through any means up to the 55 per cent mark. Above 55 per cent and up to 75 per cent, it can be done only through open market purchases.

The promoters acquired their shares to strengthen their stake when stock prices were comparatively cheap. For example, the promoter of Money Matter Financial bought 4.95 per cent stake or 1.72 million shares worth around Rs 12 crore from the open market in June last month as the share price fell almost 90 per cent. The stock was battered to a low of Rs 55 from a high of Rs 800 after the promoter’s arrest by the Central Bureau of Investigation for allegedly bribing bank officials to get loans sanctioned for some developers. To take advantage of the sharp drop in valuation, the promoters had informed the Bombay Stock Exchange in May for acquisition of shares up to five per cent through promoter group entities.

Lalit Khaitan, chairman and managing director of Radico Khaitan, bought 3.1 million shares through the creeping acquisition route in the second half of March, valued at Rs 41 crore. According to disclosures filed with stock exchanges, the promoter bought shares through group entities Rampat International and Shailaja Finance and improved holding from 37.63 per cent to 39.97 per cent.

Promoters have the tendency to buy shares from the open market at the end of a financial year within the limit of five per cent allowed each year under the creeping acquisition guidelines, say brokers. Lanco Infratech promoters L Madhusudan Rao and G Bhaskara Rao collectively acquired seven million shares, representing a stake of 0.29 per cent, through open market purchases. The stock touched a multi-year low of Rs 21.35 on June 27 after Australia-based Perdaman filed a suit against it for not complying with a coal supply agreement for an upcoming urea plant.

Punarvasu Builders & Developers and Yantra Energetics, promoters of Indiabulls Real Estate, together raised their stake 2.38 per cent through creeping acquisition. They bought 8.63 million shares, worth Rs 122 crore, of their own company through open market purchases.