Insider Buying Alert: Examining Promoter Holding Changes in these 6 Stocks

‘Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise’.

Of all the stakeholders, it is the promoters who know the most about their businesses, and future potential.

If they are willing to part with their personal money to buy shares from the open market, there is a good possibility they believe the stock is undervalued and the stock will potentially witness gains in the future.

On the other hand, promoters selling their stake in the business can usually mean many things. Maybe all is not well with the underlying business, or the stock is trading at a large premium to its fair value, or the business profitability and growth have peaked.

So, with this in mind, we outline and study the top stocks that Indian promoters have bought and sold in May 2023 so far.

Please note, this data is based on a thread from a Twitter account.

Stocks bought by Indian promoters

#1 HCL Technologies

This is not the first time promoters of HCL Technologies have come to the rescue and bought shares from the open market.

In February 2023, Shiv Nadar’s Vama Sundari Investments purchased 18 lakh shares of HCL Technologies worth ₹2 billion (bn).

Subsequently, the promoter holding went up from 60.72% in December 2022 to 60.81% in March 2023. This will go up even further in the June 2023 quarter as promoters have again bought shares from the open market.

FIIs too have turned bullish on one of the top Indian IT firms by adding stakes for the past two quarters.

HCL Tech has strong growth prospects. It expects to double its semiconductor services business in three to four years. It already has capabilities in semiconductor chip design.

HCL Group is planning to set up a chip wafer fabrication unit for 65-nanometer nodes that are used in the automobile, consumer durables, and low-cost devices segment.

The company currently works with semiconductor players like Intel, NXP, Taiwan Semiconductor Manufacturing Company (TSMC) and Applied Materials in electronic chip production.

The semiconductor plant will help HCL to complete its end-to-end offering in semiconductor production.

#2 Kotak Mahindra Bank

Next on the list is Kotak Mahindra Bank.

For the past couple of quarters, promoters of the private lender have been divesting their stake. But only a minor stake.

The trend has reversed now as reportedly, promoters of Kotak Bank have bought shares in May 2023.

Over the last couple of years, Kotak Mahindra Bank has demonstrated a highly consistent and healthy historical track record.

The bank’s net profit has grown at a CAGR of 15.2% in the last five years. This has been supported by a healthy contribution of low-cost deposits (current and savings accounts).

Besides this, the bank has sustained net NPAs below 1.5% of its loan book all these years. Its institutional memory of tiding over one credit crisis after the other for nearly 25 years has served it well.

The bank aims to accelerate its deposit engine through deeper engagement with retail customers, aggressively tapping customers, and building its institutional (including government) business and scaling up salaried customer base.

#3 Som Distilleries

Next on the list is Som Distilleries.

The alcohol and breweries company has seen significant promoter buying for the past couple of quarters. In March 2022, promoter holding stood at 29.3%. As of March 2023, promoters hold a 33.1% stake.

This number is set to go up as reportedly, promoters have once again bought shares from the open market in May 2023.

View Full Image

The company has big expansion plans going forward. In December 2022, Som Distilleries approved a proposal to set up a new canning facility and expand its existing utilities at Bhopal with an investment of ₹1 bn.

The company’s expansion plan also includes expanding the brewing facility in the Hasan Plant of Woodpecker Distilleries and Breweries.

Going forward, the company is planning to leverage from the additional capacity expansion, particularly in the canning segment, which will enable it to capture more market share.

After delivering a good set of numbers in Q3, the company mentioned in its concall that it looks to repeat the feat in Q4 given healthy volume. It’s aiming for 20-25% growth in FY24.

Stocks sold by Indian promoters

#1 Syngene International

Coming to selling, Syngene International tops the list. Not just for May 2023 but promoters of the pharma company have continuously divested stakes.

Promoter holding stood at 70.3% in June 2022 which reduced to 54.9 in the next three quarters.

In January 2023, it was reported that Biocon was likely to sell a 10% equity stake in Syngene International to raise ₹22.4 bn. In September 2022, Biocon had divested a 5% stake in the company.

Despite all this, shares of Syngene International have been on a roll. The company has surpassed its full-year guidance and reported blockbuster earnings. The revenue growth for FY23 was 23% versus the guidance of high-teen growth. Profit increased by 17% compared to the guidance of single-digit growth.

In its latest concall, the company said it added 400 scientists in Hyderabad in FY23 and commissioned a state-of-the-art sterile fill-finish facility as well as a kilo lab for polymers and specialty materials.

The company expects to maintain revenue growth in the high teens in FY24.

#2 Sterling & Wilson Solar

Next on this list is the solar firm Sterling & Wilson Solar.

Promoters of the company have sold a stake in the company for the past three quarters and in May 2023 too. In June 2022, promoter holding was at 78.6% which came down to 72.7% in March 2023.

The company is a part of the Shapoorji Pallonji group and provides services in 24 countries. To date, the company has worked on 256 projects out of which 216 projects have been commissioned. The rest of the projects are under construction.

Apart from solar, the company has also forayed into waste-to-energy projects and won its first-ever project worth ₹15 bn. The company has won this project from a European client who is a leading developer of energy assets in the region.

The company is also focusing on developing its capabilities in providing battery energy storage solutions (BESS). BESS is a natural extension of the company’s core business and would generate an additional income for the company.

#3 Coforge

Last on this list is Coforge.

Take a look at the table below to see the company’s promoter holding for the past eight quarters.

View Full Image

Adding to worries, promoters have once again sold their stake in the IT company in May 2023.

Moreover, the promoter offloading happened at a time the company was trading at peak valuations of around 50x PE, an exorbitant premium to its 5-year and 10-year median PE of 23.1x and 12.5x respectively.

This usually indicates that the promoters might think the stock is overvalued and the business prospects don’t justify the current valuations, propelling them to profit from a stake sale.

No wonder Coforge share price is falling.

The company’s business has been growing well, registering revenue and net profit 5-year CAGR of 11.5% and 10.5% respectively.

The returns have been equally strong. The business generated a 5-year average Return on Equity (ROE) of 19.8%. With zero debt on its book and healthy cashflows, the company has rewarded its shareholders consistently. The 5-year average dividend yield is 1.6%.

So there you go…your monthly update on what the insiders are up to these days.

These were just a select few companies…if you want to check out the entire list, access this information for free.

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