72% of FII deals via bulk buying

Overseas investors go far beyond secondary market.

Foreign institutional investors (FIIs) are not active in the secondary market alone "" they have been buying substantial chunks of shares in Indian companies by using global depository receipts, preferential allotments, convertible warrants and foreign currency convertible bonds. Non-resident Indians, overseas corporate bodies and foreign promoters have been selling shares to FIIs.

FIIs have also bought in bulk from public floats, private corporate bodies, Indian promoters, local institutional investors and mutual funds.

"Essentially, overseas investors are using all routes to buy Indian paper even as the valuation of Indian stocks is being overstretched," said a broker. FIIs' net purchase in the Indian equity market was to the tune of $10.7 billion in 2005. Till January 24, they bought $692 million worth of shares of Indian companies.

The shareholding information displayed on the Bombay Stock Exchange website shows that about 72 per cent of the total FII purchase in the quarter ended December 2005 were bulk purchases, while 28 per cent were picked up from the secondary market.

Overall, they have purchased 664 million shares of 398 companies during the quarter. Over 300 million shares went to FIIs through GDR conversion and 65 million shares from foreign promoters, OCBs and NRIs.

Of the 913 companies studied, FIIs have increased their stakes in 398. They have increased stakes in 50-odd companies by 4-30 per cent while in another 50, their stakes have gone up by 2-4 per cent. In 100 companies, FIIs have increased their stakes between one and two per cent.

Spentex Industries allotted a 30.46 per cent stake to Citigroup Venture Capital International Growth Partnership, Mauritius, via preferential offers.

Similarly, Beethoven Ltd acquired 14.99 per cent in Simplex Concrete Piles via preferential offers and PSL, Harig Crankshaft and HBL Nife Power, too, made strategic sales to FIIs using the same route.

Conversion of GDRs has raised FII holdings in Nagarjuna Construction, Electrosteel Castings, Gateway Distriparks, Dwarikesh Sugar, Indiabulls Financial, Sterling Biotech, EMCO, Micro Inks, Centurion Bank, Gujarat Ambuja Cement, Arvind Mills, India Cements and Sterling Biotech.

FII holdings in Nagarjuna Construction has been raised by 21.37 per cent to 24.53 via the GDR route.

Similarly, Electrosteel Castings $40 million GDR issue increased FII holdings by 21.1 per cent while in Gateway, they went up to 19.19 per cent following GDR conversion. FII holdings went up in Indiabulls, Dwarikesh Sugar, Mirco Inks and Emco, too, on account of GDR conversion.

Conversion of warrants has jacked up FII holdings in SREI Infrastructure by 19.9 per cent to 44.43 per cent. Similarly, FCCB conversion has raised FII holdings in Mcnally Bharat by 7.18 per cent while in Federal Bank, they have increased stakes by 11.55 per cent. This was after the sale of ICICI Bank's stake in the bank to FIIs.

FIIs raised their stakes in Hexaware by 13.29 per cent, buying out overseas corporate bodies' holdings. Similarly, NRIs sold their six per cent stake in Allsec Technologies to FIIs.

Foreign nationals and others offered stakes in Multi Arc to FIIs, while foreign promoters sold stakes in Biocon.