Promoters up stake in firms as markets drop

Tata firms, Bajaj group, Godrej see buying either by promoters or management

Indian promoters are using the drop in equity markets as an opportunity to consolidate their holdings in group companies.

This comes at a time when the Indian markets have witnessed an unprecedented correction over the last month and a half

Nifty is down 36% from recent highs and many stocks have seen significant correction.

The largest quantum of buying by promoters or top management was witnessed in the Tata Group (Tata Chemicals, Tata Steel, Indian Hotels, Tata Motors, Tata Power and Tata Consumer) and the Bajaj Group (Bajaj Finance, Bajaj Finserv, Bajaj Holdings and Bajaj Auto).

Promoters also enhanced their stakes in Mphasis, Maruti Suzuki, Sun Pharma, Godrej Industries, JSW Steel and GMR Infra.

L&T increased its holding in Mindtree from 60.55% to 61.07%.

Utkarsh Sinha, MD, Bexley Advisors, told The Hindu, “Bear markets usually offer great pickings for value investors looking to buy for the long term.

“We are definitely entering such a phase. And typically, a promoter is the definition of a value investor in his or her own company.”

Firms such as Sun Pharma, Emami and Granules India have announced share buy-backs.

“Buy-backs are not only the norm in such an environment, they may make the most sense for spending accumulated capital. If you are able to expand your equity pool in a bear environment, it gives you the ability to go back to the market on more favourable terms down the road,” Mr. Sinha added.

Motilal Oswal Research said there was a heightened activity in promoters buying / raising stakes.

“We expect the buy-backs to accelerate given the prevailing juicy valuations across sectors. Any relaxation on the buy-back tax front can prove to be a catalyst for more activity, in our view,” it wrote to its clients.

Tata Sons chairman N. Chandrasekaran has bought two lakh shares each of Tata Steel, Tata Motors and Tata Power each and one lakh shares each of Tata Consumer Products, Tata Chemicals, Tata Communications and Indian Hotels.

However, some promoters were seen reducing stakes.

Notable names where promoter holding had reduced over the last month include IIFL Wealth, Dixon Technologies, Varun Beverages and UltraTech Cement.

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Number of homes sold in UK expected to plunge by 60% in next three months

The number of homes sold in the UK is expected to fall by 60% in the next three months, according to the property website Zoopla.

There was a 40% drop in housing enquiries for the week to 22 March, the week before the nationwide lockdown, and new sales agreed fell by 15% on the previous week.

The trend is expected to worsen considerably in the coming months. The need for physical distancing and government advice to stay at home mean buyers and renters are unable to view properties in person. Some estate agents have switched to virtual viewings.

The housing minister, Robert Jenrick, said on Twitter: “Buyers and renters should, as far as possible, delay moving to a new house while emergency measures are in place. If moving is unavoidable because you’re contracted and the parties aren’t able to agree a delay, you must follow advice on social distancing when moving.”

Vicky Bibiris, the managing director of Location Location, a north London estate agents, said so far only one sale had fallen through because of a job loss, out of 40 transactions in the agency’s pipeline.

She said that after the EU referendum the number of sales plunged immediately, whereas this time the impact was more gradual. She estimated Location Location could face a 20% drop in transactions in the next few months.

Separate research from the upmarket estate agents Savills said that if a sharp drop in demand was extended until September, total transactions for 2020 would be between 566,000 and 745,000, compared with the 1.027m forecast last November. “Suppressed demand would be expected to return relatively quickly to the market and we could see a return to normal levels by May 2021”, it said.

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Noble Francis, an honorary professor at the Bartlett School of Construction of Project Management at UCL, said: “The estate agent sector is very volatile and tends to go hand in hand with the housing market so it suggests that estate agents will be very badly affected unless they can access government help for businesses quickly to sustain themselves until the housing market recovers.”

UK banks have pulled 552 mortgages in the last fortnight, according to Moneyfacts, equivalent to about a tenth of the mortgage market. Halifax, the UK’s biggest mortgage lender, has withdrawn the majority of the mortgages it offers through brokers.

Henry Pryor, a housing expert and former estate agent, predicted some agents would collapse. Referring to the Zoopla forecast, he said: “A 60% fall is probably optimistic given the challenges that lie ahead. Assuming we are once again back to normal by the summer it is unlikely that most buyers will be confident of making what for most is their biggest financial commitment before the new year.”

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