Promoters of automobile and auto ancillary companies such as Hero MotoCorp Ltd, Bajaj Auto Ltd, and Tata Motors Ltd have stepped up open market purchases of equity shares and other financial instruments in the past few weeks.
This follows one of the steepest declines in the BSE auto index. The index has lost 42.76% since 1 January.
On 31 March, members of the promoter group of Hero MotoCorp bought 276,000 shares in the open market for ₹44 crore, increasing the promoter shareholding from 34.63% to 34.77%.
Tata Sons Pvt. Ltd, the promoter of Tata group, invested ₹118 crore to buy 26.72 million units of undisclosed financial instruments of Tata Motors differential voting rights (DVR) on the open market on 12-13 March. Tata Motors DVR offers holders fewer voting rights for the equity shares held but may provide more dividends. On 16 March, Tata Sons chairman N. Chandrasekaran bought 200,000 shares in TML-DVR.
It is tactical to buy shares of one’s own company when the market is down, but this is generally done to stabilize falling stock prices by curbing the volume of shares traded in the open market, said analysts.
“As the promoters have better visibility of their business, acquisition of additional equity from the open market means they are confident of the future developments of their companies. This also increases investor confidence in their companies," said Mitul Shah, auto analyst, Reliance Securities.