High promoter holding in a company is positive for its stock performance. As there is ownership’s interest in efficiently running and profitably growing the company. However, this is changing in India with the advent of Board managed companies versus promoter-managed companies earlier.
In a recent report, brokerage house IDBI Capital analysed stocks with a Market Cap of ₹1000 crore and noted that stocks with nil promoter holding have delivered positive returns over the last 1, 5, or 10 years.
"Reason for this is, professionals are filling in the shoe of promoters and managing the company as directed by the board members. There is a clear structure of accountability that empowers the team to deliver on the objectives. In large Cap, companies which standouts in this regard are ICICI Bank, HDFC, L&T and Mid and Small caps are Federal Bank, IEX, Redington, MCX, Karnataka Bank, and Subex," it said.
It is important to note that there are regulations around minimum public share-holding but no guidelines for minimum promoter holding. A person is a promoter if his holding is over 10 percent in a company.
Who is a promoter?
The brokerage explained that a promoter is a person who incubates an idea, and fructifies that idea with a business plan and growth target. High promoter holding in a company
portrays confidence in the mind of investors. However, this is changing now and a lot of companies has nil promoters holding and are managed by professional and guided by the direction of board members, it stated.
"As the holding of institutional and public is increasing in the companies, there is a shift which is happening in India from promoter managed to board managed companies. Off-late listing of entities or new age companies are board managed as promoters have diluted their stake for the growth of the company," highlighted IDBI.
Stock performance by m-cap
Among stocks with nil promoter holdings, ICICI Bank is the one with the highest m-cap of over ₹6.3 lakh crore. The stock has gained 19 percent in 1 year, 212 percent in 5 years and 343 percent in 10 years.
HDFC is next on the list, in terms of m-cap ( ₹5 lakh crore). the stock has risen 21 percent in 1 year, 48 percent in 5 years and 235 percent in 10 years.
ITC, which has a market cap of ₹4.9 lakh crore, has advanced 48 percent in 1 year, 44 percent in 5 years and 90 percent in 10 years.
L&T, with a market cap of ₹3.1 lakh crore was also up 28 percent in 1 year, 60 percent in 5 years and 238 percent in 10 years.
The fifth top firm, on the basis of m-cap, with no promoter holding is Zomato. This is the only stock that has not given positive returns. It has fallen 35 percent in the last 1 year. It was listed in August 2021, hence data for 3-year and 5-year returns are unavailable.
By 1-year returns, 5-year and 10-year returns
In the last 1 year, among stocks with nil promoter shareholding, Karnataka Bank is the only stock that has given multibagger returns, up 108 percent followed by South Indian Bank, up 93 percent. Meanwhile, Ujjival Financial Services has advanced 68 percent, ITC has risen 48 percent, IDFC has gained 30 percent, and L&T and Equitas Small Finance Bank added 28 percent each.
Among losers, BSE lost the most, down 47 percent followed by Indiabulls Real Estate, which declines 44 percent. Meanwhile, Zomato, IEX, Cartrade Tech, and Hindustan Oil also shed over 30 percent each in the last 1 year.
In the last 5 years, 6 stocks gave multi-bagger returns with Cressanda Solutions surging the most, up 873 percent. Meanwhile, Subex and ICICI Bank rallied over 200 percent each and IEX, Redington, and Religare Ent were up over 100 percent each in the last 5 years.
Among losers, Yes Bank cracked the most, down 95 percent, followed by Indiabulls Real Estate, down 72 percent, RBL Bank, down 7 percent, Care Ratings, down 50 percent and South Indian Bank, down 40 percent.
Finally, in the last 10 years, 8 stocks gave multibagger returns while 10-year return data for 13 stocks were not available and only 5 stocks gave negative returns. ICICI Bank and Reddington jumped over 300 percent each in the last 10 years, while HDFC, L&T, and Subex surged over 200 percent each and Hindustan Oil, City Union Bank and Federal Bank advanced over 100 percent each.
Among losers, Yes Bank topped again, down 84 percent in the last 10 years, followed by Religare Ent, down 53 percent. Cressanda Solutions also lost 40 percent, South Indian Bank declined 25 percent and Care Ratings shed 12 percent in this period.
