Promoters get Rs 5k cr via dilution

Promoters of Infosys, Eicher Motors, Page Industries, Jubilant FoodWorks and Castrol India have sold equity shares worth nearly Rs 5,601 crore in past two-and-half months, data show

Those of Infosys, Eicher Motors, Page Industries, Jubilant FoodWorks, and Castrol India have sold equity shares worth nearly Rs 5,601 crore in the past two-and-a-half months, data show

Promoters of companies in the private sector have raised around Rs 5,000 crore by offloading a stake in their respective ventures. The promoters of five companies — Infosys, Eicher Motors, Page Industries, Jubilant FoodWorks, and Castrol India — have sold equity shares totalling Rs  5,601 crore in the past two-and-half months, data from the exchange announcement show.

On May 19, Castrol sold 56.87 million equity shares constituting 11.5 per cent of the paid-up equity share capital in its Indian arm — Castrol India — for Rs 2,078 crore via an open market sale.

“By selling a minority stake of, say one or two per cent, promoters are able to collect huge money. A few years ago, by selling a higher stake would not have fetched them such a huge amount. That apart, they also realise the valuations could be stretched in some cases and they are smart enough to cash out,” says G Chokkalingam, founder and managing director of Equinomics Research & Advisory.

  Although the buoyant markets have provided promoters with an exit route, experts also say one cannot paint the entire canvas with the same brush as the reason for selling stake vary from company-to-company.

“Promoters could be selling due to a variety of reasons, including using the money for personal use. For instance, charity was cited as one of the reasons why promoters in Eicher sold a part of their stake. Then we have the likes of VRL Logistics where promoters plan to offload some stake to set up a different line of business. With the upturn in the economy, promoters are also looking at setting up new businesses," says Prakash Diwan, director, Altamount Capital Management.

Earlier in May, Anita Lal, Rukmani Joshi and The Eicher Goodearth Trust – part of the promoter group of Eicher Motors – sold a part of their stake for around Rs 2,100 crore. According to the company, the sale was done to provide liquidity to the promoters, and the proceeds are to be utilised for personal use, such as portfolio and other investments, and for charitable purposes.

Infosys co-founders S Gopalakrishnan and S D Shibulal, along with his family members, too, sold 7.5 million equity shares of the company, for about Rs 900 crore, through open market transaction. Page Industries and Jubilant FoodWorks promoters sold shares worth of around Rs 250 crore.

PSUs lag
While the going has been good for companies in the private sector, their public sector counterparts have raised nearly half this amount thus far in the current financial year (FY17). However, this could pick-up once the government’s divestment programme gathers steam.

The government has been able to raise Rs 2,750 crore thus far in FY17 by offloading its 11.36% stake in state-owned hydropower producer NHPC through offer for sale (OFS). Of 1,258 million equity shares, 587 million shares or 5.3% stake subscribed by the state-owned insurance giant, Life Insurance Corporation of India.

“Here, one needs to acknowledge that the performance of private players is superior compared to the PSUs. As a result, they get a better valuation multiple and stake sales find many takers. In case the PSUs don’t perform well, there is a contraction of the valuation multiple in the market, which explains low mobilisation. In case the government’s divestment programme does not find takers, it is expected that LIC will come to the rescue,” Chokkalingam adds.

According to reports, the Department of Investment and Public Asset Management is gearing up for minority stake sale in state-owned companies in the first half of 2016-17 and has issued requests for proposals for merchant bankers to assist in stake sales in State Trading Corporation (STC), MMTC, NMDC, Oil India, National Fertilizers and Rashtriya Chemicals and Fertilizers (RCF).

The Centre plans to sell 15 per cent stake each in STC, MMTC and National Fertilizers, 10 per cent each in NMDC and Oil India, and five per cent in RCF, reports suggest.