The year 2008 might not be memorable for equity investors, yet it unfolded a significant opportunity for various promoters to elevate their shareholdings at remarkably low prices. Throughout the year, these promoters have embarked on a vigorous campaign to increase their stakes, largely driven by enticing valuations, and in certain instances, as a desperate attempt to counteract plummeting share prices.
In a recent move, the Securities and Exchange Board of India (Sebi) has raised the promoter holding limit from 55% to 75% under its creeping acquisition guidelines. This development has expanded the potential for stake increases, emboldening promoters to fend off any takeover attempts, according to analysts.
Data submitted to stock exchanges reveals that promoters of several firms, including GMR Infrastructure, Gitanjali Gems, Kesoram Industries, Larsen and Toubro, Mastek, NIIT, Patel Engineering, and Praj Industries, have been actively buying shares in large quantities. Analysts suggest that the main advantage of purchasing in the current market landscape is the affordability of acquisition, as the stocks of these companies have experienced a decline between 60-85% from their peak values.
GMR Infrastructure serves as a case in point; the principal promoter, GMR Holdings, has acquired approximately 42.3 lakh shares between December 15 and 18, boosting their stake to 74%.
Similarly, Mehul Choksi has purchased around 33 lakh shares of Gitanjali Gems from the market since early October, which constitutes close to 4% of the company’s equity. Furthermore, NIIT’s promoters have acquired about 17 lakh shares, while the Chaudhari family of Praj Industries has added 21 lakh shares to their holdings. Additionally, L&T's CMD AM Naik has bought around 2 lakh shares, despite not being a designated promoter.
The promoters of Deccan Chronicle—T. Venkattram Reddy, T. Vinayak Ravi Reddy, and P.K. Iyer—have collectively acquired nearly 52 lakh shares from the open market.
Analysts express that this is indeed an opportune moment for promoters to engage in creeping acquisitions and reaffirm their commitment to their firms. "It makes logical sense for promoters to purchase shares in the market, as this would assure investors of a robust liquidity position among promoters," observed Divyesh Shah, CEO of Indiabulls Securities.
Curiously, it has been noted that numerous promoters of real estate companies have also bought shares in the market over the recent months. Although the percentage or quantity of shares acquired may not be sufficient to provide significant support to stock valuations, such transactions can aid in instilling confidence among investors, according to brokerage firms.