Tata, Bajaj among 277 promoters that hiked stake in group firms in March

The 40 per cent correction in benchmark indices from their January 2020 peak has prompted promoters of companies to buy/raise their stake in group companies. According disclosures made by the companies to stock exchange, promoters of 277 firms large as well as mid-and small-sized companies bought 267 million equity shares worth of Rs 3,745 crore in the month March alone via open market purchase.
Indian markets have seen an unprecedented correction over the last two months with the Nifty50 and S&P BSE Sensex corrected 40 per cent and 39 per cent from their respective all-time highs touched on January 20, 2020. The benchmark indices slipped 23 per cent thus far in the current month. Last week, the indices hit their lowest level since May 2016.
Analysts say the promoters are using this opportunity to buyback is a typical feature of a bear market that serves two basic purposes - one is to buy shares at an attractive price and the second is to instill confidence in the minds of shareholders that the promoters are still backing the company even in turbulent times. That apart, some promoters also believe cash could be put to better use through buybacks rather than being locked up in a fixed deposit or remain idle.
“The trigger for hiking stake has been the price crash. If the return on capital employed (ROCE) is in double digits and the company is fundamentally sound, it justifies the long-term objectives of the company also. If a promoter is sitting on cash, it is always beneficial to invest where there can be a healthy ROCE going ahead. Buyback is better in such bear markets as the money invested can get better return than a bank deposit or any other investment,” explains G Chokkalingam, founder and managing director at Equinomics Research.
Among the lot, the highest quantum of promoter buying was seen in Tata Group companies that includes Tata Chemicals, Tata Steel, Indian Hotels, Tata Motors, Tata Power and Tata Consumer; Bajaj Group firms Bajaj Finance, Bajaj Finserv, Bajaj Holdings and Bajaj Auto; and Godrej Group companies - Godrej Industries and Godrej Agrovet.
Tata Sons has bought total equity shares worth of Rs 1,011 crore of six group companies during the month. The stock price of Tata Steel, Indian Hotels Company and Tata Power Company slipped between 38 per cent and 46 per cent in CY20. On the other hand, Mphasis’ promoter, Marble II, acquired 7.5 million shares representing 4 per cent of total equity worth of Rs 525 from the open market. The stock of the information technology (IT) services firm hit 52-week low of Rs 612 on March 23, and has corrected 33 per cent in CY20.
A K Prabhakar, head of research at IDBI Capital, too, says that the promoters are utilizing this opportunity to instill confidence in the retail investors via the buyback route. “Valuations are attractive for promoters to buy aggressively in case they have surplus cash in their balance-sheet,” he says.

The promoters of HCL Technologies, JSW Steel, Adani Ports and Special Economic Zone, Mphasis, Maruti Suzuki, Sun Pharmaceutical Industries, GMR Infra and Indiabulls Housing Finance, too, increased their stake in their companies. Many stocks have seen significant and meaningful corrections thus far in the calendar year 2020 (CY20) with prices of several of them crashing more than 50 per cent their respective 52-week high.

Mumbai firm Darwin Group submits bid to invest in grounded Jet Airways

Company News

Ajay Harinath Singh, a Mumbai-based resident who claims to run diverse businesses across 11 countries, has submitted an offer to invest in Jet Airways.

Singh’s Darwin Platform Group (DPG) is the third unsolicited bidder to stake a claim for revival of the grounded airline. Others include former flight steward-turned-entrepreneur Jason Unsworth and London-based investment firm Adi Partners.Representatives of DPG, including its Chief Executive Officer Rahul Ganpule met executives of SBI Capital Markets on Wednesday. The meeting took place a day after top-level exits at Jet, which is seen as a pointer to airline’s uncertain future.

Lenders had called for bids last month and among qualified parties, only Etihad Airways submitted a conditional investment offer. The Abu Dhabi airline has said anyone investing more than 5 per cent in Jet should have its approval. Lenders continue to seek investors to turn around the airline and are meeting those making unsolicited bids.A report on Moneycontrol.com said a Russian aviation professional named Oleg Evdokimov, too, has submitted his expertise to turn around Jet but he is not interested in picking up a stake.

While continuing to engage with unsolicited parties lenders are taking their offers with a pinch of salt. “Discussions are going on to ascertain their seriousness. We have asked them for documents and proofs of investible funds,” said a source from the banking industry.


 DPG representatives told SBI Capital Markets they could invest Rs 14,000 crore in the airline and sought details of the company’s assets, liabilities and litigation. DPG website says Singh is a native of Sultanpur (Uttar Pradesh), with a royal-cum-business background and can speak Dutch, French and Russian language, along with other Indian languages. Singh’s business interests span across various areas like finance, farming and film production.

Tata Chemicals transfers food and beverages business to Tata Global

Company News

The $104-billion Tata group on Wednesday announced that it was demerging the consumer products business of Tata Chemicals into Tata Global Beverages as part of a larger mandate to bring food and beverages under one unit.

The announcement brings to an end days of speculation and comes nearly two months after Tata Sons Chairman N Chandrasekaran restructured operations under 10 verticals at the conglomerate in a bid to streamline its business.

Tata Global will be renamed Tata Consumer Products after the demerger and will see its turnover rise 25 per cent to Rs 9,099 crore with earnings before interest, tax, depreciation and amortisation (Ebitda) of Rs 1,154 crore. The market capitalisation of the new entity will be Rs 18,000 crore at the current share price of Tata Global, said analysts, which is an increase of nearly Rs 5,800 crore over its Wednesday’s market capitalisation, which stood at Rs 12,500 crore.

Under the demerger process, 114 shares of Tata Global will be issued for every 100 shares of Tata Chemicals, taking the latter’s post-demerger share base to 920 million from 631 million now.
Also, Tata Chemicals will see its revenue (including inter-segment sales) decline by 15 per cent to Rs 10,336 crore.


 Apart from Tata Salt and Tata Sampann, which is into spices, pulses and snacks, the demerger will see the transfer of a little-known brand called Tata Dx, a detergent powder, to Tata Global. Launched by Tata Chemicals on a pilot basis in West Bengal in the March quarter, this brand is likely to get an aggressive push from Tata Global in future as it eyes a foray into home care. Top sources in the group say this is one of the key legs of the consolidation drive in consumer, which will unfold in the months ahead.