Top companies where promoters have trimmed their stake in the past one year

Over the past one year (till March 2019 quarter), a number of prominent companies such as Axis Bank, YES Bank, MphasiS, HDFC Life Insurance have seen their promoters trim their stake in the companies.

Emami promoters on Monday sold 10 per cent of their stake in the company for around Rs 1,230 crore to pare debt. This was the second stake sale undertaken by the FMCG (fast moving consumer goods) firms' promoters in less than six months. Earlier, in February too, they had sold a 10 per cent stake for Rs 1,600 crore.

Promoters paring stake in their company is nothing new. While the move may raise concerns as regards their commitment to the company they own, the reasons for paring stake may vary and experts suggest investors should assess such moves on a case-to-case basis, rather than making a generalised view. 

For instance, over the past one year (till March 2019 quarter), a number of prominent companies such as Axis Bank, YES Bank, MphasiS, L&T Technology Services, HDFC Life Insurance, Piramal Enterprises, Eicher Motors, Mahindra & Mahindra, Tech Mahindra and Bajaj Electricals have seen their promoters trim their stake in the companies consistently, ACE Equity data show. 

So, should you be wary of stocks where promoters are continuously lowering their stake?

"If the promoter stake in any company is 80 per cent and they have sold it to bring down to the required level of 75 per cent, then there's nothing to be worried about, as they are just abiding by the rules. However, if the company is facing a lot of debt issues and the promoters have pledged their shares, then it can lead to a crisis of confidence among investors," says Devang Mehta, head of equity advisory at Centrum Wealth Management. 

Data fetched from ACE Equity shows promoter holding in Axis Bank has slipped over 32 per cent over the last four quarters. During March 2018 quarter, the promoter holding in the bank stood at 27.60 per cent, which has come down to 18.70 per cent till March 2019 quarter. Companies such as Rolta India and Ruchi Soya industries have seen promoter shareholding decline by 74 per cent and 51 per cent, respectively during this period. 

Promoters in other notable names such as Mpahsis, L&T Tech Services and HDFC Life Insurance have reduced their holdings by 13 per cent, 11 per cent, and 6 per cent, respectively. 

As regards Emami, Ambareesh Baliga, an independent market analyst, says the promoters reducing their stake in the company shows their positive intent. 

“Selling stake is not easy but they are still going to that extent, extra mile to ensure that shareholder wealth does not depreciate further. Emami’s performance has indeed been soft but that does not justify this kind of steep fall at the bourses,” Baliga adds. 

At the bourses, Emami has underperformed benchmarks in the calendar year 2019 (CY19) by falling over 36 per cent (till June 24) as compared to nearly 8 per cent rise in the Nifty50 index. The Nifty FMCG index, on the other hand, has slipped over 3 per cent during the period. 

Echoing similar views as Mehta of Centrum, Baliga says if the promoters exit the company for personal reasons like buying a house, etc, then it should be seen negatively. 

Company Name	Promoter holding in % (March qtr, 2019)	Promoter holding in % (Dec qtr, 2018)	Promoter holding in % (Sept qtr, 2018)	Promoter holding in % (June qtr, 2018)	Promoter holding in % (March qtr, 2018)	Change (%)
Rolta India Ltd.	13.35	21.50	25.07	48.91	50.40	-73.51
Ruchi Soya Industries Ltd.	28.08	33.89	34.33	48.63	57.28	-50.98
Sri Krishna Constructions (India) Ltd.	32.49	35.28	45.01	50.73	61.71	-47.35
Jiya Eco-Products Ltd.	39.53	42.12	47.00	57.44	63.63	-37.88
Axis Bank Ltd.	18.70	23.71	25.91	26.23	27.60	-32.25
Upasana Finance Ltd.	53.46	55.40	62.85	63.32	74.93	-28.65
Cigniti Technologies Ltd.	36.31	36.51	37.37	46.81	47.21	-23.09
Mangalore Chemicals & Fertilizers Ltd.	59.78	61.10	61.93	63.96	75.00	-20.29
CreditAccess Grameen Ltd.	80.19	80.26	80.30	98.88	99.00	-19.00
Mphasis Ltd.	52.26	52.29	52.34	52.37	60.38	-13.45
L&T Technology Services Ltd.	78.88	80.41	80.66	87.10	88.81	-11.18
Larsen & Toubro Infotech Ltd.	74.80	74.84	75.00	81.54	82.96	-9.84
Arcotech Ltd.	65.41	65.63	68.31	68.52	72.16	-9.35
Parsvnath Developers Ltd.	64.84	64.89	65.46	66.66	70.47	-7.99
Bombay Rayon Fashions Ltd.	35.96	35.99	37.67	38.35	38.51	-6.62
HDFC Life Insurance Co Ltd	76.14	80.71	80.84	80.90	80.93	-5.92
Vaibhav Global Ltd.	63.08	64.03	65.36	66.44	66.49	-5.13
Granules India Ltd.	42.90	44.87	44.88	44.89	44.94	-4.54
Piramal Enterprises Ltd.	49.70	49.99	50.66	50.77	51.38	-3.27
South India Paper Mills Ltd.	41.88	41.93	42.99	43.15	43.25	-3.17
Mahindra CIE Automotive Ltd.	67.72	67.73	67.76	69.83	69.84	-3.04
Mastek Ltd.	45.69	45.86	46.89	47.01	47.08	-2.95
Eicher Motors Ltd.	49.32	49.33	49.35	50.47	50.49	-2.32
Edelweiss Financial Services Ltd.	32.95	32.97	33.02	33.27	33.58	-1.88
Yes Bank Ltd.	19.80	19.82	19.91	19.98	20.01	-1.05
Mahindra & Mahindra Ltd.	21.51	21.57	21.61	21.66	21.71	-0.92
Firstsource Solutions Ltd.	54.12	54.13	54.17	54.32	54.47	-0.64
NIIT Technologies Ltd.	30.50	30.58	30.62	30.65	30.67	-0.55
NIIT Ltd.	31.55	31.60	31.61	31.68	31.70	-0.47
Oracle Financial Services Software Ltd.	73.50	73.53	73.55	73.79	73.82	-0.43
Sterlite Technologies Ltd.	53.82	53.83	53.86	53.96	54.03	-0.39
Royal Orchid Hotels Ltd.	69.26	69.29	69.30	69.35	69.53	-0.39
Bajaj Electricals Ltd.	62.71	62.73	62.76	62.87	62.94	-0.37
Tech Mahindra Ltd.	35.87	35.94	35.96	35.98	36.00	-0.36
V-Guard Industries Ltd.	64.12	64.15	64.20	64.29	64.31	-0.30
Jattashankar Industries Ltd.	72.60	72.65	72.66	72.74	72.81	-0.29
Nirlon Ltd.	71.35	71.42	71.46	71.50	71.54	-0.27
Quick Heal Technologies Ltd.	72.32	72.33	72.40	72.42	72.50	-0.25
Bhartiya International Ltd.	47.52	47.55	47.56	47.57	47.60	-0.17
Kotak Mahindra Bank Ltd.	29.99	30.01	30.02	30.03	30.04	-0.17
Muthoot Finance Ltd.	73.50	73.51	73.58	73.60	73.61	-0.15
Thomas Cook (India) Ltd.	66.94	66.95	66.98	66.99	67.03	-0.13
Phoenix Mills Ltd.	62.76	62.77	62.80	62.81	62.82	-0.10

Source: ACE Equity