Promoters shore up their wealth as markets tank

Written by Pradip Kumar Dey | Mumbai, Aug16 | Updated: Aug 17 2008, 07:13am hrs
The markets sentiment being gloomy could well be an opportunity for promoters and key shareholders in listed companies to shore up their stakes. And for many, this has actually resulted in an increase in wealth. A study carried out by FE reveals that companies in the private sector saw promoters wealth increase by 8.9% during last one year.

Broadly, this has happened due to an increase in promoters stake during last one year. Although numbers on promoter stake are not available at the moment, aggregate market capital in 1,993 companies in the survey saw promoters capital increase by Rs 1.30 lakh crore during August 2007, from Rs 14.52 lakh crore, as on August 13, 2007, to Rs 15.82 lakh crore as on August 13, 2008. At the same time, total market capital of these companies increased by Rs 0.06 lakh crore to Rs 29.02 lakh crore, from Rs 28.96 lakh crore during the study period.

DR Dogra, DMD, Care Ratings said, A free fall in the Sensex in 2008 saw market capital of the BSE companies wipe out about Rs 30 lakh crore. Promoters used this opportunity to increase their control in the companies by taking benefit of falling share prices and prevent from takeovers.

Promoters can increase their stake by way of open offer, buy-back of shares, issuance of preference shares to itself, warrants & FCCB conversion, creeping acquisition, amongst other things. Annually, the stake can be increased by 5% subject to a ceiling of 55% holding by them, he added. Some analysts also attribute this move to support their share prices falling further.

RIL promoters, the numero uno in terms of market capital, kept the number one rank during both the time period. Not only did it keep its number one rank, but in the process, the promoters of Reliance Inds also increased their wealth by a cool Rs 44,876 crore. Promoters of Reliance Petroleum have been at the forefront and have bagged the sixth slot, while adding Rs 14,328 crore to its market cap. The top five promoters in terms of market capitalisation in the descending order in August 13, 2008 are Reliance Industries, Bharti Airtel,DLF, TCS and Reliance Comm.