Promoters offloaded record $14 billion shares in 2023

Leading the way was the Adani group, which diluted 32.3% stake in five group companies for  ₹39,326 crore. (Photo: Reuters)
Leading the way was the Adani group, which diluted 32.3% stake in five group companies for 39,326 crore. (Photo: Reuters)

Summary

  • The sectors that saw the most significant promoter selling included financial services, power, automobiles, metals & mining, and technology.

Mumbai: Family business promoters such as the Adanis and Anil Agarwal (Vedanta) as well as professional ones such as private-equity firms raked in the moolah big time by selling stakes in their companies in the colossal bull run of 2023. That year, the benchmark BSE Sensex rose 18.7% and the NSE Nifty, 20%.

The promoters sold in all shares worth 1.15 trillion ($14 billion), a staggering 161% rise from the 44,013 crore in 2022, and way higher than any other year in the past 10. The sectors that saw the most significant promoter selling included financial services, power, automobiles, metals & mining, and technology.

Leading the way was the Adani group, which diluted 32.3% stake in five group companies for 39,326 crore. Next in line was Barings PE, former promoter of Coforge, which sold 39.9% in the tech company for 11,000 crore. IndiGo co-promoter Rakesh Gangwal's wife Shobha Gangwal divested her entire 7% stake in InterGlobe Aviation Ltd for 5,746 crore. (See chart for the top 10 list.)

The sales have helped reduce promoter debt levels, helped them reinvest in new business areas, and gave PE firms exits at attractive levels. The latter, in particular, took the rise in promoter sales to a new high last year, experts said.

"In the last seven years alone, there has been a total of $350 billion investment from the gamut of alternate investment funds, which includes PE, VCF, Angel funds, etc, into equity, credit and real estate," said Nilesh Shah, MD, Kotak Mahindra AMC. “Given the normal tenure of 7-10 years for a fund you will see these sales, where PE is promoter, increase."

Lakshmi Iyer, CEO-Investment & Strategy, Kotak Alternate Asset Managers, said while Sebi’s restriction of 75% promoter holding in listed firms did contribute to some of the stake paring, the rich valuations of listed companies, which indicate that stock prices are high relative to their earnings or asset values, also played their part.

“This favourable valuation environment may be encouraging promoters to sell shares at high prices, thus capitalising on the premium valuation," she said, adding that improved liquidity in the market has also provided promoters with easier access to buyers for their shares.

The experts also see the momentum in stake sales carrying through in 2024. Atul Parakh, CEO, Bigul, an online investment and trading firm, said the trend may continue to be seen this year in consumer, infrastructure and realty sectors.

And both Iyer and Atul Parakh, suggested that stake sales in companies where PE firms are promoters would continue in 2024, as these professional firms seek to leverage the continuing favourable market conditions to make exits at attractive valuations.

"To my mind, the sales will be greater in cases where PEs are the promoters rather than in traditional promoter-led companies. The markets are giving an attractive exit to these entities," said Jyotivardhan Jaipuria , founder Valentis Advisors.

Post the promoter paring sales, shares of most companies have risen. For instance, Adani Group's market capitalization has doubled, reaching 16.11 trillion on compared to a low of 6.81 trillion after the Hindenburg report last year. Adani Enterprises, the flagship company, saw its market value surge from 1.36 trillion to 3.66 trillion, Adani Green experienced a similar climb, jumping from 73,213 crore to 3.03 trillion, other notable gains include Adani Ports ( 1.21 trillion to 2.8 trillion), Adani Power ( 53,746 crore to 2.1 trillion), and Adani Energy ( 75,485 crore to 1.2 trillion).

Meanwhile, Coforge's share price has surged over the year, pushing its market capitalization to a whopping 39,946 crore from 24,127 crore, marking a significant 66% return for investors. However, the company's valuation seems stretched compared to its peers. Coforge's FY2025 price-to-earnings (P/E) ratio stands at 34 times, which is higher than HCL Tech (25 times), Infosys (25 times), L&T Mindtree (29 times), and Mphasis (28 times), according to Bloomberg.

Similarly, Sona BLW Precision Forgings has delivered a 57% return to investors, with its market cap increasing to 38,752 crore from 24,521 crore. However, its FY2025 P/E ratio of 51.6 times is significantly higher than peers like Samvardhana Motherson (19.8 times) and MRF (26.8 times), and Bharat Forge (32.2 times).

In contrast, Vedanta has had a rough year, with its market value dropping to 97,687 crore from 1.17 trillion, resulting in a negative return of 15% for investors. While its FY2025 P/E ratio stands at 9.7 times, lower than peers like Tata Steel (13 times) and SAIL (14.4 times), JSW Steel (13.7 times) and Hindustan Zinc (13.7 times).

 

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