Listed Companies with Zero Promoter Holding Mar2023
(This is for information purposes only. This should not be construed as a recommendation or investment advice even though the author is a CFA Charterholder. Please consult your financial adviser before taking any investment decision. Safe to assume the author has a vested interest in stocks / investments discussed if any.)
(This is an update of an earlier blog dated 04Dec2022)
On average, a little more than 50 percent of the equity shareholding in Indian listed stocks is held by promoters. However, only a handful of listed companies, out of more than 4,000 listed companies, in India have zero promoter holding.
The following list provides a glimpse of such companies in the order of their market capitalisation (companies with a zero promoter holding as on 31Mar2023 and a market cap of more than Rs 1,500 crore as on 19May2023) >
Compared to the previous data as of 30Sep2022, six companies, namely, Crompton Greaves Consumer Electricals, Equitas Small Finance Bank, Indiabulls Housing Finance, Hindustan Oil Exploration, Balmer Lawrie & Co and Subex Ltd., are added to the list of zero promoter holding between Sep2022 and Mar2023.
Private equity firms Advent International and Temasek Holdings have completely exited Crompton Greaves Consumer Electricals, after buying the firm in 2016. Hence, the promoter stake is marked down to zero as on 31Dec2022.
As part of a Scheme of Amalgamation, Equitas Holdings Ltd was merged with Equitas Small Finance Bank effective 02Feb2023. Hence, Equitas SFB now has no promoter stake officially.
At the top of the list by market cap are companies, like, ICICI Bank, ITC, HDFC Limited (which is in the process of getting merged with HDFC Bank Ltd), L&T and new-age company Zomato. At the other end are companies, like, Balmer Lawerie & Co, Cartrade Tech and Care Ratings.
You may have noticed that private banks and other financial services companies dominate the above list. Other stocks include stock / energy exchanges, platform companies and those relating to new-age companies listed in the past one year or so.
India's banking regulator, Reserve Bank of India or RBI, is not comfortable with promoters running the show in a bank (the fear is a bank promoter may misuse bank funds for lending to other promoter entities and ultimately troubling the bank).
Only a handful of private sector banks, like, Kotak Mahindra Bank, IndusInd Bank, AU Small Finance Bank, IDFC First Bank and Bandhan Bank have promoter stake of between 16 and 40 percent.
LIC of India has 8.2 percent stake in Axis Bank and is considered as a promoter for technical reasons. Practically, Axis Bank is run professionally similar to ICICI bank.
Technically, some firms may have zero promoter holding -- but, a set of people may hold firm control over the company practically.
It is often argued firms with managements having high promoter stake (that is, with substantial skin in the game or family-owned businesses) will do better than firms that are run by managements with no significant shareholding.
It's generally believed that a high promoter holding gives strong incentives for the owners / managers to create and sustainably generate long term value for minority shareholders.
Professional managers might be tempted to work for themselves and in the process their actions may be detrimental to the long-term interests of the owners (which is known as principal-agent problem in corporate lexicon).
There
are certain companies with large promoter holding, but which are run by
professional managers -- for example, Asian Paints, Marico Ltd,
HCL Technologies, Pidilite Industries and others. In general, the promoters of these
companies do not interfere in the day-to-day operations of the company. Such companies are in a completely different league.
Let us see, on a three- to five-year perspective, how the firms with no promoter holding will stack up against companies managed by promoters / owners.
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Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial instruments / products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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