Since the market was volatile during the December 2021 quarter, many stocks saw decent corrections.
When the promoters of a company increase their stake, there is a lot of curiosity to know why this happened.
While promoters may have a hundred reasons to sell, they usually have only one compelling reason to buy. The market feels that the promoters know something that they do not know.
Since the market was volatile during the October-December 2021 quarter, many stocks saw decent corrections. Taking advantage of the opportunity provided by the reform, the promoters increased their stake.
However this is not true in America. Promoters of US companies are selling their stake amid rising market valuations.
Let’s take a look at 6 companies where promoters increased their stake during the last quarter.
#1 Tejas Network
From a zero promoter holding entity since its listing in 2017, Tejas Network became a promoter holding entity in the December 2021 quarter.
Shareholding data for December 2021 shows that the promoter group holds 37.3% stake in Tejas Networks.
This was on the cards as the Tata group announced plans to acquire a stake in the domestic telecom gear firm. With this the Tata group acquired a controlling stake in Tejas Networks.
Tata Sons and its subsidiaries Pantone Finvest, Akashast Technologies made a cash offer to acquire equity shares of Tejas Network at a price of Rs 258.
At the end of September, Kotak Mahindra Capital announced details of an open offer by Pantone Finvest to acquire 40.25 million shares, or 26% stake. This was followed by a preferential allotment of 16.8% of Tejas Network shares to Pantone Finvest on July 29, based on a shareholder agreement.
Ever since it was announced that the Tata Group would acquire a controlling stake in Tejas Network to help it access 5G technology, its shares declined.
Now that Tejas Networks has the backing and financial resources of the Tata Group, it will expand its telecom products-portfolio. It will design/manufacture a gamut of 4G and 5G wireless gear. This will help Tejas take on the likes of Ericsson, Nokia and Huawei in tapping capital investments.
With 5G technology, telcos including Tejas Network have big plans to roll out 5G.
No wonder why mutual funds and foreign investors with 5.2% and 14.2% stake are bullish on the stock. Seasoned investor Vijay Kedia also holds around 2.3% stake.
#2 Goldstone Technologies
Shareholding data for Goldstone Tech for December 2021 shows that the promoters of the company significantly increased their stake by 35.1% in the October-December period.
Promoters now hold 53.9% stake in the company. Earlier the promoters held 18.8% stake.
The company’s board had in October last year approved the allotment of 15.8m fully paid-up equity shares at an issue price of Rs 14.30 by preferential allotment.
Incorporated in 1994 and based in Hyderabad, Goldstone Tech is promoted by LP Sasikumar. It provides software development and management services.
Commanding a penny stock position a year ago, Goldstone Tech’s stock is on the roll. From Rs 8 in January 2021, it is currently trading at Rs 90. This is a massive increase of over 800%!
The sharp growth has been driven by good results posted in the September 2021 quarter. The company’s net profit grew nearly 25 times to Rs 18.2 million as against Rs 0.7 million in the previous quarter.
In addition, investors are betting on smaller IT services and technology solutions providers as Omicron’s exposure remains. Goldstone peers – R Systems International, Palred Tech and 3i Infotech – have also done well. IT companies do well in this scenario, just as they were strong during the first and second wave of covid.
#3 JSW Holdings
The promoters of JSW Holdings bought around 537,451 shares of the company during the October-December 2021 quarter. In percentage terms, it accounts for a share increase of 4.84%.
The top three promoters are Siddheshwari Tradex (12.58 Lakh Shares / 11.3%), Nalva Sons Investments (11.37 Lakh Shares / 10.24%), and Vinmara Consultancy (10.83 Lakh Shares / 9.76%).
Overall, the promoters hold 73.55 lakh shares or 66.3% stake, of which 13.49 lakh shares (18.34%) are pledged.
JSW Holdings is a leading investment company, primarily engaged in the business of investment and financing. It earns most of its revenue from interest on loans (53%) and dividend income (39%), followed by pledge fees (8%).
The company’s shares have been underperforming in the past one year.
Since the company’s shares have shown a sluggish performance this year, its promoters may have been tempted to buy stake. Note that when a promoter buys more shares, investors get some relief and are assured of the company’s long-term prospects.
#4 Best Agrolife
Best Agrolife is a leading manufacturer of agrochemical products such as insecticides, insecticides, herbicides, fungicides, and plant nutrients. It has a vast distribution network of over 3,000 distributors and directs dealers with 14 stock points.
The company has over 60 products, 80 technical manufacturing licenses, around 360 formulation licenses, 30,000+ MPTA manufacturing capacity and 7,000+ MTPA integrated state-of-the-art technical plants.
For the quarter under review, the promoters of the company increased their stake by 4.6%. The total promoter holding now stands at 45.4%.
Interestingly, foreign investors also hold 11.2% stake in the agrochemical company.
In the current financial year, the company acquired group arm Best Crop Science. This acquisition will result in increased market share and better financial position for FY22. It will also solve the warehousing and logistics problems that the company has been facing for some time now.
Shares of Best Agrolife have given a multibagger return of 110 per cent in the last one year.
#5 Vedanta
Promoter holding in Vedanta has grown steadily over the past two years. Vedanta’s promoters held 50.1% stake in the company as of March 2020. Today the same figure has increased to about 70%.
In the December 2021 quarter, the promoters increased their stake to 4.5%, taking their total holding to 69.7%.
Twin Star Holdings and Vedanta Netherlands Investments BV bought around 170 million shares at an offer price of Rs 350 per share. The total value of this purchase came to Rs 59.5 billion. It was funded through a combination of loans from Oaktree Capital, IDBI Bank and Canara Bank.
A big red flag for the company is that the promoter pledge still remains at 99.99%.
Vedanta’s holding companies raised around Rs 60 billion in the quarter by pledging shares. He pledged 2,422.6m or 65.18% stake in Vedanta in three facilitation agreements to raise funds.
While you might think that the acquisition is a positive for Vedanta, many analysts have said otherwise. He said the debt is likely to increase.
Here is Nomura,
‘The cost of comfort is a big debt at a high cost. With the latest stake acquisition, we estimate the debt of the holding company of Vedanta Resources to exceed $10 billion.
Insider buying has raised other opinions as well. Many say that all this will make Vedanta unlisted.
To know more, see Vedanta’s latest shareholding pattern,
#6 Deep Polymer
Last on our list, we have a specialty chemical company that has grown manifold – Deep Polymers.
The promoters of the company increased their stake by 3.2% to 67.9% by December 2021.
Ramesh Bhimji Patel and Deep Additives Pvt Ltd are the top two promoters holding 23.8% and 22% stake respectively.
In the past one year, the shares of Deep Polymers have gained almost 800%.
The board of the company this week recommended a bonus issue of equity shares. The board also approved the rights issue.
In which other companies did insiders increase stake?
Apart from the above, here are some more companies where promoters have increased their stake.
Since you are interested in tracking promoter shareholding activity, check out Equitymaster’s Powerful Stock Screener,
This tool keeps track of which company’s promoters are increasing their stake. Here is a snapshot of the screen:
Why High Promoter Holding is a Big Positive
The level of promoters’ stake is very important, especially in India where many businesses are family owned.
The shareholding level serves as an indicator about the confidence of the promoters in the business as well as the strength of leadership control in the company.
A company with very high promoter shareholding often represents a scenario where the promoters see a bright future for the company and in return, they plan to benefit from its decent growth.
A promoter has all the information about the company. If they are investing, it shows that they are confident about the prospects of the company.
While promoter holding is an important parameter, it should not be the only reason to buy a stock.
In rare cases, penny stock promoters may use misleading information about a company’s true valuation.
In addition, promoters pledge their shares to raise funds for individual or company needs. High promoter pledges can lead to high volatility in stock prices and, as a result, can become a major investment risk.
Hence, it is always better to check the promoter’s pledge before taking an investment decision.
Happy investment!
Disclaimer: This article is for informational purposes only. This is not a stock recommendation and should not be treated as such.
(This article is syndicated from Equitymaster.com,
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
,