Five companies where promoters are doubling down

When promoters—often the founders or key decision-makers with deep insights into the business—increase their stake, it’s a strong vote of confidence in the company’s future growth and stability. This move signals belief in the company’s potential to navigate market challenges and outperform in both the short and long term.

An increase in promoter holdings often reflects solid fundamentals and a commitment to long-term growth, especially when it happens during market downturns. By putting their own capital at risk, promoters send a reassuring signal to retail investors about the company’s prospects.

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For investors, monitoring these shifts provides valuable insights into leadership confidence and the company’s vision for the future. In this context, let’s explore some companies that have seen a notable rise in promoter holdings.

#1 India Cements

India Cements, the largest cement producer in South India, stands out with its expansive operations. With four plants in Tamil Nadu and another four in Andhra Pradesh, the company caters to South India and Maharashtra, commanding a 28% market share in the region.

Its distribution network of over 10,000 stockists supports well-known brands like Coromandel King, Sankar Sakthi, and Raasi Gold, along with products like sulphate-resisting Portland cement and ready-mix concrete (RMC).

India Cements reported a decline in sales for Q3 FY25, down 15.4% year-on-year to ₹9.4 billion. Gross profit margin for the quarter stood at 74.8%, a drop from 79.5% in the same period last year. At the operating level, the company recorded a loss of ₹1.9 billion, but managed to post a net profit of ₹1.2 billion, thanks to other income amounting to ₹3.9 billion. This resulted in a net profit margin of 12.6%, a significant improvement compared to the 0.1% margin seen in Q3 FY24.

What stood out, however, was the sharp increase in promoter holdings during the quarter, rising to 55.5% from 28.4% in Q2 FY25. This surge reflects strong management confidence in the company’s future.

India Cements’ management remains optimistic, projecting robust demand in South India, where current capacity is sufficient to meet market needs. With India’s cement consumption set to rise, driven by infrastructure projects and investments in housing and commercial developments, the company is well-positioned for growth.

#2 UPL

Next on the list is UPL, a global leader in agrochemicals, industrial chemicals, specialty chemicals, and seed production. The company offers a diverse portfolio of agricultural solutions and services, with 14,236 registered products and 1,884 patents granted worldwide. UPL operates in approximately 140 countries, covering 90% of the global food basket.

The company’s product lineup includes crop protection chemicals such as insecticides, fungicides, and herbicides, along with seeds and bio-solutions. It ranks as the fifth-largest agrochemical company globally and operates 43 manufacturing facilities.

UPL’s agritech platform, 'Nurture,' connects with nearly 3 million registered farmers, over 85,000 retailers, and 25,000 dealers, strengthening its reach and customer base.

Financially, UPL reported a 9% year-on-year increase in sales for the September FY25 quarter, reaching ₹110.9 billion. The gross profit margin for the quarter stood at 47%, compared to 49% in Q2 FY24. Operating profit showed a slight improvement, reaching ₹12.1 billion, while the operating profit margin remained stable at 11%. However, at the net level, the company posted a loss of ₹5.8 billion, widening from a ₹2.9 billion loss in Q2 FY24.

In a notable move, the promoters recently increased their stake in the company from 32.5% to 33.5% compared to the previous quarter, signalling their confidence in UPL's prospects.

The management anticipates margin improvements in Q3 and the full year of FY25, driven by stable prices for key active ingredients, reduced input costs, a better product mix, and increased market share. For FY25, the company has guided revenue growth of 4-8% and expects operating profit to grow by over 50%. The second half of the year is expected to see stronger profit margins, supported by fresh inventory at lower costs and higher sales of differentiated products.

#3 Mold Tek Packaging

Mold-Tek Packaging Ltd (MTPL) is a leading player in rigid plastic packaging in India, specializing in injection-molded containers for a variety of industries, including lubes, paints, food, and other products. Its clientele includes prominent names such as Himalaya, Kansai Nerolac Paints, Asian Paints, Castrol, Mondelez International, Kwality Walls, Dabur, Adani Wilmar, Nescafe, Amul, P&G, and Haldiram’s, among others.

In terms of financial performance, the company reported revenue of ₹1.9 billion for the September FY25 quarter, marking a 12.3% year-on-year increase, driven by a 6.9% rise in sales volumes. Operating profit stood at ₹336 million, reflecting a modest 4.4% growth due to a shift in the product mix and underutilization of newly added capacities. The operating margin for the quarter declined to 17.6% from 18.9% a year ago.

Higher depreciation and interest expenses, resulting from significant investments made over the past two years, led to a net profit of ₹141 million, down 10.1% year-on-year. The net profit margin fell to 7.4% from 9.4% in the same period last year.

In Q3, promoters increased their stake in the company to 32.9%, up from 32.7% in the previous quarter, signalling confidence in the company's long-term growth prospects.

Looking ahead, the management remains optimistic, particularly about the pharma segment, citing strong demand and recent approvals from major clients. They expect operational improvements and enhanced financial performance in the second half of FY25 compared to the first half.

However, while double-digit growth for the full year is anticipated, the initial target of 15% may not be achieved due to delays in the Mahad plant’s operations and the expansion of the printing facility.

#4 Himadri Speciality Chemical

Himadri Speciality Chemical Ltd (HSCL) is a leading manufacturer of carbon materials and chemicals in India. It holds the distinction of being the country’s top coal pitch manufacturer and the only domestic producer of advanced carbon materials. The company’s product portfolio spans battery materials, coal tar pitch, carbon black, naphthalene, refined naphthalene, SNF, and specialty oils.

HSCL caters to a wide range of industries, including lithium-ion batteries, paints, plastics, tires, aluminium, graphite electrodes, agrochemicals, defence, and construction chemicals, underscoring its diverse industrial applications.

On the financial front, the company reported sales of ₹11.4 billion for Q3 FY25, marking an 8.4% year-on-year growth. The gross margin improved to 33%, up from 28% in Q3 FY24. At the operating level, HSCL achieved a profit of ₹2.2 billion, with the operating margin rising to 19% from 17% in the same period last year.

Net profit for the quarter stood at ₹1.4 billion, reflecting a net margin of 12.4%, an improvement from 10.3% year-on-year.

In the third quarter of FY25, promoter holdings rose from 50.7% to 51.5%.

The management is optimistic about the future on the back of lithium ion battery demand growing 33% annually and battery energy storage demand also poised to grow multi-fold.

#5 IOL Chemicals & Pharmaceuticals

IOL Chemicals & Pharmaceuticals is a leading player in the active pharmaceutical ingredients (APIs) industry and holds a significant position in the specialty chemicals segment, serving both domestic and international markets. It is the world’s largest producer of Ibuprofen, a widely used painkiller, with a global market share of 35% (12,000 TPA) and backward integration capabilities that enhance its efficiency.

Additionally, the company is the largest producer of ethyl acetate at a single location in India and the second-largest global producer of iso butyl benzene (IBB), holding a 30% market share worldwide.

Financially, the company faced challenges in the September quarter of FY25, with sales declining by 3.6% year-on-year to ₹5.3 billion. The gross margin for the quarter dropped to 32%, compared to 35% in Q2FY24. Operating profit stood at ₹420 million, reflecting a decline in the operating profit margin to 8% from 12% in the previous year.

At the net level, the company reported a profit of ₹190 million, with the net profit margin contracting to 3.6% from 6.9% year-on-year.

Despite these challenges, the promoters recently increased their stake to 52.6%, up from 48.2% in the previous quarter, signalling their confidence in the company’s future.

The management is focused on optimizing market strategies, enhancing operational efficiencies, and expanding production facilities to drive revenue growth and profitability. They remain optimistic about a potential recovery in pricing for key products and continued operational improvements.

Conclusion

Rising promoter holdings often signal confidence in a company’s long-term prospects, but it’s essential to approach these trends with a balanced perspective. While an increase in promoter stake can indicate strong fundamentals or a belief in future growth, it doesn’t always guarantee success or immediate gains.

Promoters may also raise their holdings for reasons such as defending against hostile takeovers or addressing market liquidity concerns, which could mask underlying issues. Furthermore, moves made during market downturns might reflect an attempt to capitalize on lower valuations, rather than robust business performance.

Investors should not rely solely on promoter stake increases as an investment indicator. A thorough evaluation of the company’s fundamentals, business model, financial health, and market conditions is crucial. Corporate governance and leadership quality should also be key factors in any investment decision.

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By adopting a comprehensive approach, investors can make informed choices, ensuring their portfolio aligns with their goals and risk tolerance.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com