Are promoters cashing in by selling stake?

An analysis of promoter holdings in companies shows that a lot of promoters have cashed in by selling out their stake (from BSE 100 and 200), instead of raising their holdings, as they had done in the earlier part of the move, reports CNBC-TV18.

Analysts compared BSE 100, 200 and 500 companies. 90 per cent of the BSE 100 companies have raised money since 2001. Only 40 per cent of the promoters have raised their stake from these companies. Promoters of 15 per cent of companies have upped their stake, whereas 30 per cent of promoters have reduced their stake.

Among BSE 200 companies, 81 per cent of companies have managed to raise capital from the market, since the beginning of 2001, and only 30 per cent of these promoters have raised their stake from the raised capital. During the last quarter, with regard to the promoters of the BSE 200 companies, 12 per cent of companies have upped their stake, while 42 per cent of promoters have reduced their stake in these companies.

Moving on to the BSE 500 stocks, 63 per cent of companies have managed to raise capital from the market and only 22 per cent promoters have raised their stake. During the last quarter, promoters of only 8 per cent of companies upped their stake, whereas promoters of 54 per cent of companies have sold shares in the market.

The primary reason for selling is the valuation gap and the PE play coming in. Looking at the mid caps, valuation premium is in line with largecap counters and that could be one reason they have started selling down.