Tata, Bajaj among 277 promoters that hiked stake in group firms in March

The 40% correction of the benchmarks since their peak in January 2020 has prompted company promoters to buy / increase their participation in group companies. According to the disclosures made by companies on the stock exchange, promoters of 277 large and medium and small businesses bought 267 million equity securities for a value of Rs 3,745 crores during the month of March alone via a purchase on the Free market.

The Indian markets have experienced an unprecedented correction in the last two months, as the Nifty50 and S&P BSE Sensex indices were corrected by 40% and 39% compared to their respective historical highs reached on January 20, 2020. The benchmarks have slipped 23% so far. during the current month. Last week, the indices hit their lowest level since May 2016.

Analysts say promoters use this buyout opportunity is a typical feature of a bear market that serves two basic purposes – one is to buy stocks at an attractive price and the second is to give shareholders confidence that the promoters are still supporting the company even in turbulent times. Aside from that, some promoters also believe that the money could be better used through buyouts rather than being locked in a fixed deposit or remaining inactive.

“The trigger for the rise in stakes was the price crash. If the return on capital employed (ROCE) is double digits and the business is fundamentally healthy, this also justifies the long-term goals of the business. If a promoter is sitting on cash, it is always advantageous to invest where there can be a healthy ROCE in the future. Redemption is better in these bear markets because the money invested can get a better return than a bank deposit or any other investment, “says G Chokkalingam, founder and managing director of Equinomics Research.

Among the lots, the largest number of promoter purchases was observed in the Tata group companies, which include Tata Chemicals, Tata Steel, Indian Hotels, Tata Motors, Tata Power and Tata Consumer; The companies of the Bajaj Group Bajaj Finance, Bajaj Finserv, Bajaj Holdings and Bajaj Auto; and the Godrej group companies – Godrej Industries and Godrej Agrovet.

Tata Sons bought a total of shares worth Rs 1,011 crore from six group companies during the month. The share prices of Tata Steel, Indian Hotels Company and Tata Power Company have slipped between 38% and 46% over the past six months. In contrast, Mphasis’ promoter, Marble II, acquired 7.5 million shares representing 4% of the total capital of 525 rupees on the open market. Information technology services (IT) company stock hit a 52-week low of Rs 612 on March 23, and corrected 33% during CY20.

A K Prabhakar, head of research at IDBI Capital, also says that developers are taking advantage of this opportunity to inspire confidence in retail investors through the buyout path. “The valuations are great for promoters who want to buy aggressively in case they have excess cash on their balance sheets,” he says.

The promoters of HCL Technologies, JSW Steel, Adani Ports and Special Economic Zone, Mphasis, Maruti Suzuki, Sun Pharmaceutical Industries, GMR Infra and Indiabulls Housing Finance also increased their participation in their companies. Many stocks have experienced significant and significant corrections so far in calendar year 2020 (CY20), with prices in many falling more than 50% from their respective 52-week highs. .

Company Shares acquired in
million Rs crore

Mphasis

7.5

521.17

Tata Steel

15.5

456.77

HCL Technologies

9.1

392.57

Indian Hotels

19.8

213.38

Tata Chemicals

2.6

160.22

JSW steel

8.3

141.88

Maruti Suzuki

0.2

134.26

GMR Infra.

81.3

133.81

Tata Power Co.

27.3

109.35

Bajaj Holdings

0.4

100.23

Source: Bourse

Developers bought shares on the open market in March

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