Promoters Increasing Their Holdings: Have you ever wondered why smart investors look at companies with growing promoter holdings? Tracking changes in promoter holdings can be an important investment strategy. When promoters increase their shareholdings, it is a clear indication of their confidence in the company’s future growth and prospects. Promoters are usually the founders or key decision makers of the company, who have a deep understanding of the business and its long-term strategy. Their decision to invest their own money is indicative of strong fundamentals and financial stability. Especially, when they increase their holdings during times of market volatility, it demonstrates their long-term vision and commitment to capitalizing on low prices. This allows investors to view such companies as having strong prospects for the future and to structure their portfolios more effectively.
Promoters Increasing Their Holdings
When promoters increase their holdings in a company, it typically indicates confidence in its future growth. Promoters, who are usually key stakeholders with deep knowledge of the business, are signaling their belief in the company’s potential. While this can be a positive sign for investors, it’s important to also consider other factors like the company’s financial health and market conditions before making investment decisions.
1. UPL
UPL is a diversified agricultural and chemical company, engaged in the production of agrochemicals, industrial chemicals, specialty chemicals and seeds. It is known as a leading provider of agricultural solutions and services, with 14,236 registered products, 1,884 granted patents and operations in about 140 countries. UPL is associated with 90% of the world’s food supply, which further strengthens its global position.
The company’s product portfolio includes pesticides, fungicides, herbicides, seeds and organic solutions for crop protection. It is the fifth largest agrochemical company in the world, with 43 manufacturing facilities. Their agri-technology platform ‘Nurture’ directly connects 3 million farmers, as well as 85,000+ retailers and 25,000 dealers.
On the financial front, UPL has shown a 9% growth in annual sales in the September quarter of FY25, reaching Tk 110.9 billion. The gross profit margin for the quarter came in at 47%, slightly lower than 49% in Q2 FY24. The company’s operating profit increased marginally to Rs 12.1 billion compared to Q2 FY24. However, at the net level, it reported a loss of Rs 5.8 billion in Q2 FY25, higher than Rs 2.9 billion in FY24.
These financial figures reflect both the company’s strengths and challenges, where it faces some headwinds in financial performance despite its strong position in terms of production and product diversification. UPL’s promoters recently increased their stake in the company from 32.5% to 33.5%, reflecting their confidence in the company. Management expects margins to strengthen further in the third quarter and the full fiscal year on the back of stable key ingredient prices, lower input costs, improved product mix and market share gains.
The company has released guidance for FY25, targeting revenue growth of 4% to 8% and operating profit growth of over 50%. Management is also confident that profit margins will improve in the second half of the year. They expect new inventory at lower prices and increased sales of differentiated products to play a major role in this improvement. This trend is a positive sign for investors as it further brightens the prospects for the company’s future financial performance.
2. India Cements
India Cements is the largest cement manufacturing company in South India, with a total of eight plants in Tamil Nadu and Andhra Pradesh. These plants cater to the cement needs of South India and Maharashtra, where the company holds a 28% market share. It has established itself as a leading player in the cement industry.
The company has a strong distribution network of over 10,000 stockists. Its major brands include Coromandel King, Shankar Shakti, Rasi Gold, Coromandel Blended Cement and Sulphate Resistant Portland Cement. It also supplies products like Ready Mix Concrete (RMC), which is important for infrastructure projects. India Cements posted sales of Rs 9.4 billion in the December quarter of FY25, but year-on-year sales declined by 15.4%. The gross profit margin for the quarter declined to 74.8% from 79.5%.
At the operating level, the company posted a loss of Rs 1.9 billion. However, it managed to post a net profit of Rs 1.2 billion as it earned Rs 3.9 billion from other income. The net profit margin for the quarter increased from 0.1% to 12.6%, indicating a significant improvement. During the quarter, the promoter holding increased significantly to 55.5%, which is much higher than 28.4% in Q2 FY25. This increase indicates the high confidence of the promoters and their commitment to the future growth of the company.
India Cements management has given a positive outlook for strong demand for cement in South India and infrastructure projects, housing and commercial developments. Cement consumption is expected to increase significantly due to ongoing projects. This trend and the ability to adapt to market demands will help India Cements strengthen its position in the cement industry. This could be a promising opportunity for investors for long-term growth.
3. Himadri Speciality Chemical
Himadri Specialty Chemicals Limited (HSCL) is one of the leading names in carbon materials and chemicals manufacturing in India. It is the country’s leading coal pitch manufacturer and the only company to manufacture advanced carbon materials.
HSCL offers a range of products, including battery materials, coal tar pitch, carbon black, naphthalene, refined naphthalene, SNF, and specialty oils. The company’s products are used in key industries such as lithium-ion batteries, paints, plastics, tyres, aluminium, graphite electrodes, agrochemicals, defence and construction chemicals.
In Q3 FY25, HSCL reported 8.4% YoY growth in sales to Rs 11.4 billion. Gross profit margin increased from 28% to 33% during the period. At the operating level, the company posted a profit of Rs 2.2 billion, which increased the annual operating margin from 17% to 19%. Net profit in the third quarter was Rs 1.4 billion, and net margin increased from 10.3% to 12.4% year-on-year.
Promoter holding increased from 50.7% to 51.5% in the third quarter of FY25, indicating high management confidence in the company’s long-term growth prospects. The demand for lithium-ion batteries is growing at a rate of 33% annually and the demand for battery energy storage has increased manifold. HSCL is poised to play a significant role in the industry by providing innovative solutions to meet this demand.
The company’s financial position, strong product line and growing promoter confidence make it a promising opportunity for investors. Learn more details from their financial data sheet and quarterly results.
4. Mold Tek Packaging
Mold-Tech Packaging Limited (MTPL) is a leading name in rigid plastic packaging manufacturing in India, manufacturing injection-molded containers for lubes, paints, food and other products. MTPL’s customers include Himalaya, Kansai Nerolac Paints, Asian Paints, Castrol, Mondelez International, Quality Walls, Dabur, Adani Wilmar, Nescafe, Amul, P&G, Haldiram’s, etc. This extensive client list is a testament to the company’s strong position and credibility in the market.
In the September quarter of FY25, MTPL reported revenue of Rs 1.9 billion, a 12.3% YoY growth. Sales volume grew by 6.9% YoY, and operating profit was Rs 336 million, a 4.4% YoY growth. However, operating margin declined from 17.6% to 18.9%, and net profit fell to Tk 141 million, down 10.1% YoY due to high depreciation and interest expenses in the last two years. Net margin was 7.4%, down 9.4% YoY.
The company’s promoters recently increased their stake to 32.9%, from 32.7% in the previous quarter. This reflects their confidence in the business and their belief in future growth. MTPL’s management is optimistic about growth in the pharma segment. They expect future improvements due to strong demand and approvals from key clients. They expect operational improvements and improved financial performance in the second H1.
However, due to delays in operations at the Mahad plant and expansion of the printing facility, the company will not be able to achieve its initial 15% growth target. However, they expect double-digit growth for the full year. All these aspects have created a promising environment for MTPL’s long-term growth, and this could be a viable opportunity for investors.
5. IOL Chemicals & Pharmaceuticals
IOL Chemicals & Pharmaceuticals is a leading pharmaceutical (API) company and a key player in the specialty chemicals industry. It serves domestic and international markets, and is the world’s leading producer of ibuprofen (analgesic), with a 35% market share (12,000 TPA). It is also the largest producer of ethyl acetate in India and the second largest producer of isobutyl benzene (IBB) in the world, with a 30% share.
On the financial front, the company’s sales for the September quarter of FY25 declined by 3.6% to Rs 5.3 billion. Gross margin for the quarter was 32%, compared to 35% in the same period last year. Operating profit was Rs 420 million, and operating margin was 8%, down from 12% in the previous year. Net profit declined to Rs 19 crore, with a net margin of 3.6%, compared to 6.9% in the previous year.
Recently, the promoters’ holding increased to 52.6% from 48.2% previously, reflecting their confidence in the company. The management is committed to optimizing the market strategy, increasing operational efficiency and improving revenue and profitability, and is optimistic about future performance, particularly through potential recovery in core product pricing and ongoing operational improvements.
Conclusion
While an increase in promoter shares can sometimes be a good sign of confidence in a company’s future and overall business potential, it is important for investors to be cautious. Increasing promoter shares do not always guarantee success or immediate growth. In particular, in some cases, they may take this step to prevent limited market liquidity or takeovers, which may not be a direct positive indication of the company’s future.
During a downturn, this increase in promoter shares can sometimes mask underlying challenges that may not be immediately apparent. For this reason, it is imperative for investors to assess the company’s fundamentals, business model and market conditions rather than making decisions based solely on share movements.
Trustworthy leadership is certainly important, but it should always be compared to the broader economic situation and the financial health of the company. When making investment decisions, it is essential to gather appropriate information, conduct unbiased analysis and evaluate all relevant considerations.
Finally, investors must conduct due diligence in accordance with corporate governance and good governance standards, so that they can make informed and balanced decisions.