With the stock markets rallying smartly and driving up prices to new highs, several promoters are using the opportunity to cash out. Sales of shares by promoters are nudging Rs 71,000 crore so far this year, data from primedatabase.com reveals. This compares with total sales of Rs 1.62 lakh crore in 2023 and Rs 2.45 lakh crore last year.
The sales have been made either via bulk and block deals, the offer for sale (OFS) route in initial public offerings or the OFS mechanism on the stock exchanges. Pranav Haldea, managing director, Prime Database Group, said promoters may pare their stake for a variety of reasons, including when they believe the valuations may be attractive. “They also offload shares to be able to repay debt or invest in other business,” Haldea said.
Amit Ramchandani, CEO, Motilal Oswal Investment Banking, said that valuations have risen over the past month and therefore, sales of shares by promoters and PEs could continue at this pace until the end of June.
“The window to sell is not very large because the results season will begin. Moreover, the geopolitical situation could worsen,” Ramchandani said.
Mahavir Lunawat, chairman of the Association of Investment Bankers of India (AIBI), observed that since the primary market is going through a bit of a lull, some promoters who may have probably planned a QIP (qualified institutional placement) or a follow-on offering may not have been able to raise funds via those routes. “They are probably trying to raise some cash for some immediate need,” Lunawat said.
As market watchers point out, there are situations when promoters need to bring down their stake in their companies to meet the minimum public shareholding norms, as per the guidelines prescribed by the regulator. The BSE Sensex has moved up from 77,560 on December 31, 2024 to 81,442 on June 5.