Company promoters seem to have used the extreme market volatility in the April-June quarter to either increase or decrease their stakes. While 71 companies has seen the promoter stake increase by more than a percent as many as 94 companies has seen the promoters’ stake go down by a percent. A majority of these companies belong to the midcap and smallcap sector.

These promoters could include directors and their relatives, Indian and foreign promoters, NRI promoters, corporate bodies, holding companies and persons acting in concert. And this significant change in promoters’ shareholding pattern could either be a result of open offer, buy back of shares, issuance of preference shares to itself and creeping acquisition or a combination of all.

However, market experts agreed that it is difficult to ascertain the different routes via which this change in the promoters’ stake was brought about.

It should be noted that the most of the indices including the 30-stock benchmark BSE Sensex had reached their pinnacle during the second week of May. The markets then corrected severely till June 14 following a meltdown in global commodity prices as was reflected by fall in prices of metals on the London Metal Exchange, LME.

Company promoters may have used the euphoria preceding the rally that culminated on May 10 to sell their stakes at higher prices market analysts believe. Contrarily, they might have used the violent correction that followed to ramp up their shareholding. This might have been done via the creeping acquisition route or by an open offer to the company shareholders as well.

According to SEBI guidelines promoters of a company can acquire not more than 5% of its own shares via the creeping acquisition route in a year. Also, the other way that the promoters can increase their shareholding in a company without violating the SEBI rule is by taking the approval of their shareholders for preferential allotment of shares to themselves.

Out of the shareholding pattern of 1067 companies that have been reported so far promoters of 19 companies have increased their stake by over 5% with 13 of these ramping up their stakes by more than 10%.

Continued on page 2