Promoters active in weak market

Promoters' holdings up 0.05 per cent in the quarter ended June 2004.

The weak equity market came as a great opportunity for promoters to consolidate holdings in their companies. Shareholding data culled from the Bombay Stock Exchange (BSE) website show that promoters' holdings went up marginally by 0.05 per cent in the quarter ended June 2004 over the previous quarter.

An analysis of the shareholding pattern of companies, the shares of which are traded in the elite A group, shows that promoters added 15 million shares to their existing holdings during the quarter.

In a wider sample of 2,350 companies, promoters' holdings increased in about 500 companies. Their holdings fell in just about 150 companies, while it remained at the March-end level in the rest.

But data on promoters' holdings provided to stock exchanges have to be interpreted carefully. An increase in the equity capital on account of rights issues, allotment of shares to employee stock options (ESOP) holders, conversion warrants and convertible bonds can lead to a change in the equity holding of promoters.

Promoters are also known to shift their holdings into holding companies or other investment vehicles. Promoters also parcel out their holdings to associates, who technically are 'persons acting in concert', and therefore, are a part of the promoter group.

A first reading of the shareholding pattern of Infosys Technologies, for example, shows that promoters' holdings slipped from 26.52 per cent in March 2004 to 22.02 per cent in June 2004.

But data on the Infosys Technologies website show that none of the core promoters sold a single share in the market during the period. So what explains the discrepancy? The reason is that 4.46 per cent holding of four promoters -- Jamuna Raghvan, N Sriram, N Anand and NS Raghavan -- was shifted to the non-promoter category.

In the case of Wipro, the promoters' holding slipped by 0.02 per cent because the equity capital increased by way of allotment of ESOPs during the quarter. Such changes also took place in the case of Satyam Computers, Tata Steel, HCL Technologies and many other companies.

In all these cases, the holdings of the core promoters remained intact, while those of co-promoters were shifted to non-promoter categories.