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Rising promoter stake lead to better results, higher stocks

Where promoters have increased their stake, the growth has been excellent leading to higher share price

Continuously rising stake by promoters can lead to an early signal of improving fundamentals and of course, a sharp rise in stock prices. A recent study by Moneylife found that promoters of 71 companies out of the 1,328 companies from our database have increased their stakes in the last four consecutive quarters.
It’s unusual to see promoters’ holding increase on a regular basis. They usually step in to buy after a sharp market decline to shore up their holdings. They don’t continuously increase their stake, quarter after quarter in a rising market. If they did, it would not only indicate their confidence about their companies but also show that they are very bullish indeed. This is exactly what has happened. As the Moneylife study found out, rising promoter holding was an early indicator of financial performance and stock price performance.

Promoters’ stake has increased the most in Linc Pen & Plastic, by 41% in the December 2008 quarter to the September 2009 quarter. Its operating profit has grown 164% and the stock has surged 119% in the same period. Promoters of JBF Industries (24%), Hexaware Technologies (22%), Genus Power Infrastructures (14%) also were a very confident lot. These companies have performed very well at the operating level and their stock has been in the investor’s radar over this time period. JBF Industries posted a strong operating profit growth of 50% and its stock soared 230%. Hexaware recorded a 533% rise in operating profit from a low base of last year and its stock rallied 284% in the same period. Genus Power Infrastructures also posted a strong performance as its operating profit grew by 36% and stock rose by 69%. All these companies have recorded significant growth in profit and therefore in share prices.

Promoters in the pharmaceutical sector were especially upbeat. Their holding in eight drug companies increased in each of the past four quarters. Companies like Suven Life Sciences, Shasun Chemicals & Drugs and FDC Limited were some of the pharma stocks that attracted investors’ interest because of their operating profit growth. Shasun, Suven and FDC posted a rise in their operating profit by 549%, 178% and 162% respectively. These three stocks gained 145%, 87% and 50% respectively.

Auto components was another sector where promoters were bullish where Banco Products (India), Autolite (India) and Ramkrishna Forgings posted a rise in operating profit of 205%, 155% and 133% respectively. These three stocks gained 115%, 58% and 128% respectively. Despite the general feeling that the textile companies were in the dumps, many of the spinning companies have been doing well and not surprisingly, promoter activity was intense in many textile companies too. In six companies, there has been a rise in the stake in each of the past four quarters. Nahar Spinning Mills and Eurotex Industries & Exports posted a growth of 492% and 433% in operating profit. Their stock prices grew by 140% and 110% respectively. So, next time, you see promoters increasing their stakes in successive quarters, you know that the financial performance is going to be good and the stock prices would possibly be higher.

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    1 decade ago

    Suven Life Sciences is a True Multibagger.

    Ashit Kothi

    1 decade ago

    Can you pls provide the list by mail or in your article.

    BSE Brokers Forum asks bourses to reconsider new trade timings

    The management committee of the Bombay Stock Exchange (BSE) Brokers Forum has asked the Exchange to reconsider the new trade timings that would come into effect from next month.

    In a release, the Committee said that it does not see any visible and clear benefit to any market participant, stakeholder, institution or retail investor due to the move to advance market opening to 9am from 9.55am. This has also been reaffirmed by 79% of the trading members of BSE in a survey conducted by the BSE Brokers Forum in November 2009. 

    No sections of the markets have demanded any such move and there is no consensus on the matter, the Committee said.

    The BSE Brokers Forum has asked both the exchanges, BSE and the National Stock Exchange (NSE) to take into consideration the ill-effects of the early opening at 9am on the market participants and investors at large and appealed them to reconsider their decision.


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    Yahoo! to close its offices worldwide for a week

    Internet firm Yahoo!'s offices worldwide will remain shut from 25th December through 1st January as part of a cost-cutting measure, reports PTI.


    According to the Wall Street Journal, Yahoo! is shutting down its offices, except for 'essential functions', for about a week, as the company searches for new ways to cut costs during the recession.


    Apart from Yahoo!, other companies like Adobe and Apple would also close their offices during the holidays. Adobe and Apple would close their offices from 24th December to 1st January.


    The Internet company's move is its first mandatory world-wide shutdown, although it has encouraged US employees to take the week off in the past, the report said, citing Yahoo! spokeswoman Dana Lengkeek.


    "Shutting down during a traditionally slow week allows employees to recharge, and the company to reduce operating costs for the week," the daily quoted Lengkeek as saying.


    The report noted that US employees can use vacation time or take unpaid leave for the days not covered in the holiday schedule, while employees from outside the US would be paid as per the local laws.


    Yahoo! has already laid off about 700 people in spring as a cost-cutting move.


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