MNC promoters paring stakes, exiting at lofty valuations and Whirlpool is not the first

This is not the only such exit seen over the past few months.

In August last year, GMM Pfaudler's parent, Pfaudler International sold a 13.5% stake in the Indian arm via block deals, post which, its shareholding in the company fell below 1%.

Timken India's parent had also sold 8% equity via block deals in June last year. In eight months since that transaction, which took place on June 20, 2023, the stock has been an underperformer, declining 13%.

Thomas Cook promoter Fairbridge Capital had also offloaded an 8.5% stake in November last year through an Offer for Sale.

Lastly, Gokaldas Exports also saw its promoter Clear Wealth sell around 10% stake in the company in March last year. The management told CNBC-TV18 back then that the promoter does not intend to sell any further stake in the company.

There are more on the anvil as well. CNBC-TV18 reported last week that Novartis AG, the parent company of Novartis India, has initiated a strategic review of the 70% stake it owns in the India entity. Sources also told CNBC-TV18 that Dr Reddy's Laboratories is in the fray for that stake, a development the latter has termed a "market speculation".

Reports are also suggesting that Sumitomo Wiring is looking to sell its 14.5% equity in Samvardhana Motherson via block deals.

If one looks at the valuation picture, there is a big gap in the valuation multiple at which the parent companies trade, compared to the Indian entities.

Whirlpool of India has been an underperformer over the last five years, with the stock returns being flat. Yet, the Indian entity trades at a financial year 2025 price-to-earnings multiple of nearly 44 times, while the parent company, Whirlpool Corporation, which itself has declined 25% over the last five years, is trading at a price-to-earnings multiple of just over 7 times.

The same is the case for Timken India and Novartis. The other companies have parent/promoter entities that are privately owned.

A common thread though is that none of the Indian entities are trading at a price-to-earnings multiple less than 20 times.

MNC promoters have made merry in selling stakes at lofty valuations. Whether the buyers have fallen prey to FOMO (a term used for the fear of missing out) or taken a calculated risk, time will tell.