While a drop in valuations is prompting promoters to consolidate their shareholding by buying stocks in India, their American peers are offloading their stakes amid soaring market valuations.
Promoters of about 120 large and mid-cap companies in India have consolidated their holdings by buying company shares from the open market since October 1. While there has been an uptick in economic growth and consumer demand, stock prices have seen a correction, prompting promoters to buy shares at lower valuations, The Economic Times reported.
On the other hand, 48 top executives in the United States have clocked over $200 million each from stock sales so far in 2021, The Wall Street Journal reported.
Who is buying in India?
Companies such as JSW Steel, Grasim, Adani Green, Bharti Airtel, Bajaj Holdings, Bajaj Auto and CEAT have all seen their promoters buy shares in the company. Market regulator SEBI allows a promoter to buy up to 5 percent equity in the company through the acquisition route in a fiscal. When a promoter buys shares, investors are assured of the long-term prospects of the company.
Kumar Mangalam Birla-led IGH Holdings has bought shares for Rs 182 crore in Grasim Industries since October 1, the ET report added, quoting BSE data. Bajaj Group units Bachhraj & Co and Bachhraj Factories have increased their stake in Bajaj Holdings by acquiring shares worth Rs 113 crore. Promoters of Adani Green bought shares worth Rs 180 crore. Similarly,
Anil Agarwal-led companies -- Vedanta, Vedanta Netherlands Investments BV and Twin Star Holdings -- raised their shareholding in the company by acquiring 167.5 million shares last month at Rs 5,858 crore.
Why are Indian promoters buying stake?
Shares of some of these companies became attractive with a drop in valuation. Share prices of Bajaj Auto fell 22 percent in the past six months, while CEAT, JSW Energy and Phillips Carbon Black witnessed stock price correction of 10-25 percent since October 1.
"Price and valuation correction during 2020 and 2021 would also have prompted to add holding considered below companies' long-term intrinsic value," Vinod Nair, Head of Research of Geojit Financial Services was quoted as saying by ET.
Who is selling in the US?
High-profile insiders like
Tesla CEO Elon Musk, Microsoft CEO Satya Nadella, the Walton family and Meta Platforms CEO Mark Zuckerberg are breaking records with stake sales. Google Co-Founders Larry Page and Sergey Brin and cosmetics billionaire Ronald Lauder have offloaded their stake for the first time in four years.
Why are they selling?
Insiders usually sell at peaks and buy in troughs, say experts. But in the US, the heaviest selling came ahead of potential tax increase by lawmakers as part of the Democrats’ Build Back Better legislative package. The legislation, which is yet to be approved by the Senate, is likely to bring in a 5 percent tax on income above $10 million from 2022. For income over $25 million, there will be an additional 3 percent tax, including capital gains from stock sales.
Apart from this, there are state laws. Microsoft’s Satya Nadella sold almost half of his total stake last month for $374 million before taxes, ahead of Washington State imposing a 7 percent long-term capital gains tax from next year. Tesla’s Elon Musk sold more than $10 billion worth shares in the electric car making company in a month, which included nearly $4 billion to cover his tax withholding on option exercises.
Some other insiders cashed in on the soaring stock prices and growth revival. Zuckerberg collected $4.5 billion before taxes by selling more Meta shares this year than a year ago. His share sale came on the back of the company reporting record sales and earnings.
“People are clearly being opportunistic,” Ben Silverman, director of research firm InsiderScore, was quoted as saying by the Wall Street Journal.
(Edited by : Shoma Bhattacharjee)
