Promoters, being the driving force behind a company, have a clearer view of its operations, strategies, and potential. Their level of ownership reflects their confidence in the company's growth prospects. 

So high promoter holdings can signify strong ownership and confidence in the company., The high stake aligns their interests with shareholders and provides management stability. Fluctuations in promoter holdings can indicate potential risks, impacting market sentiment, and raising concerns about minority shareholders' interests. It can also signal strong buying interest from an outside investor, which compels promoters to sell some stock. So while promoter selling can be a negative signal for the company, it has to be viewed in context of the company’s overall performance and the size of the promoter’s current holding.

In this edition of Chart of the Week, we will analyze companies from a screener which shows the percentage QoQ change in promoter holdings.

Major sectors that appear in the screener are general industrials, banking & finance and automobile & auto components. Notable stocks include MTAR Technologies, HDFC Asset Management Company and Craftsman Automation.

We begin with the companies where promoters have the highest holdings, but are reducing their stake. Topping this list is HDFC Asset Management Company, which has a promoter holding of 52.6% in June 2023. The firm has seen its promoter holding reduce by 10.2 percentage points QoQ. HDFC AMC’s promoter Arbdn Investment divested a 10.2% stake and exited as a promoter just before the HDFC merger. This ended the JV it had formed with Housing Development Finance Corp to form HDFC AMC. The sold holdings have been acquired by foreign institutional investors (FIIs) and mutual Funds (MFs), which have invested 5.5% and 4.3% stakes respectively. A notable FII that invested is SmallCap World (0.4% stake), and MFs are SBI Mutual Fund (7% stake) and Nippon Life India (1.8% stake). 

Now, we move on to the auto components major, Craftsman Automation with a promoter holding of 55% in June 2023. Its promoter divested a 3.8% stake in the June quarter. The divestment was compensated by a 3.3% investment from FIIs. Among the major investors, Goldman Sachs (1.2% stake) stands out. This interest by FIIs in the stock aided its price to grow by 44.8% over the past quarter.

In the general industrial sector, RHI Magnesita India and Timken India have a promoter holding of 55.5% and 57.7% in June 2023.They have seen their promoter holdings decrease by 4.66 percentage points and 10.1 percentage points QoQ respectively. For RHI Magnesita, this was compensated by investments from FIIs and MFs, accumulating to 1.5 and 5.3 percentage points respectively. A major MF investor in this case is Axis Mutual Fund (0.2% stake). 

On the other hand, Timken India’s reduction in shareholding has primarily been compensated by investments from MFs, aggregating to 5.2%. Prominent MF investors include SBI Tax Advantage Fund (4.7% stake), Nippon Life (0.8% stake) and Aditya Birla Sun Life (1.2% stake).  

From the higher promoter holding companies, we move on to the ones with lower promoter holdings with falling stake. MTAR Technologies’ has a promoter holding of 39.1% and has been reduced by 7.5 percentage points in June 2023. Kalpataru Projects International also saw a dip of 6.1 percentage points. Some of the stakes sold by promoters were picked up by FIIs (1.2%) and MFs (3.9%). MFs that invested in the company are ICICI Prudential (1.4% stake) and Aditya Birla Sun Life (2.4% stake). 

Central Depository Services’ promoter holding stood at 15% in June 2023,  after a decrease of 5 percentage points QoQ. It has a single promoter, BSE (Bombay Stock Exchange). The promoter selling was compensated by an increase in MF stake by PGIM India Trustee (1.4% stake). According to Trendlyne’s Shareholding data, 47.9% stake of the company lies with the public. 

Unlike HDFC AMC, other banking & finance majors like PNB Housing Finance and Home First Finance Company India have comparatively lower promoter holdings of 28.2% and 30.2% as of June 2023. PNB’s promoter shareholding fell by 4.4 percentage points QoQ. In March 2023, the company raised Rs 2,494 crore through a rights issue, because of which the promoter shareholding went down to 28%. Similarly, Home First’s promoter shareholding fell by 3.3 percentage points QoQ. This was offset by FIIs and MFs purchasing 1.9% and 2.2% stakes respectively. Notable investors include Invesco India Tax Plan (1% Stake) among MFs and Government of Norway Pension Fund (3.2% Stake) among FIIs.

The sole representative of the software & services sector in our list, Coforge, saw its promoters reducing their holdings by 3.5 percentage points QoQ to 26.6%. This sale was made by its promoter, Baring PE, through a subsidiary, Hulst BV. This was balanced by MFs investing a 4.3% stake. The MFs that invested in the company are Aditya Birla Sun Life (0.1% stake), Motilal Oswal Flexi Cap Fund (2.7% stake), Mirae Asset (1.1% stake) and Invesco India Contra Fund (1.2% stake). Motilal Oswal maintains a ‘Neutral’ rating and says  that the company’s robust performance growth and profitable deal wins in FY24 have likely been factored into the stock price, leaving limited potential upside.  

Lastly, Sona BLW Precision Forgings’ promoter holding has declined by 3.2 percentage points QoQ to 29.8% in June 2023. As of December 2022, the company’s total promoter holding stands at 53.5%. But with Blackstone selling its entire stake of 20.5% in March 2023, the holding has been lowered to 33%. Again in May 2023, the company’s promoter, Aureus Investment, reduced its exposure by 3.2%.