With Infosys Technologies setting the tone for the infotech (IT) companies by turning in better-than-expected results and many other companies in the same space putting out results in line with expectation, a closer look at the shareholding pattern of these companies for the last three quarters shows foreign institutional investors (FIIs), who used to hold sizeable stakes in IT companies are slowly reducing their exposure in the sector.
The number of FII shareholders in the bellwether Infosys, which stood at 625 for the quarter ending September 2007, has come down to 563 as reflected by the shareholding pattern for the quarter ending March 2008. In the case of Infosys, there was a time when 50% of its shareholding was held by FIIs. Even Patni Computers followed the same pattern where the numbers of FII shareholders have dipped from 45 for the quarter ending September 2007 to 42 for the recently ended quarter. The number of FII holders in Wipro has also reduced from 154 to 145 in the same time period.
It’s not that only the number of foreign shareholders have fallen. With the sole exception of Infosys, their shareholding in terms of percentages has also come down in many of these tech companies. In percentage terms, total FII stake in Infosys has increased marginally from 32.18% to 33.36% in the last three quarters, while in Patni Computers, the FII stake in percentage terms has come down from 20.03% to 18.36% in the same time period. Wipro saw a reduction in FII holding in the last two quarters, where the total FII stake has decreased from 6.04% to 5.25%.
The latest shareholding pattern for companies such as Mastek, CMC Ltd and 3i Infotech, which came out with quarterly results last week, has also reflected the same trend during the same time period.
Anita Gandhi, head of Institutional business, Arihant Capital said, ?Over a period of time, FIIs have slowed down their exposure in the IT and ITeS companies mainly due to the slowdown in the US economy. Also, with the appreciating rupee as against the US dollar, the profit margins were also depleting. As a result, we saw a very grim 2007 for the IT stocks. However, with government hinting at extending the tax benefits to the IT companies and many IT companies restructuring their strategies, the situation may not be that grim as was in 2007″.
However, it is not only the FIIs, but even domestic institutional investors (DIIs) have been reducing their stakes in the IT and ITeS companies, the exception being insurance firms, which have, by and large, held on to their holdings in these companies.
With changes in the strategy from the IT companies, be it on the employment side or slowly shifting their focus to other stable geographies for their order books, many experts believe that the next few quarters for IT and ITeS stocks may not be that bad on the Indian bourses and, slowly, FIIs may again look to increasing their stake in the sector.