India Inc’s promoters have held on to their holdings, despite sharp swings in the market and corporate profitability in the past 10 years.
Promoter stake in India’s leading family-owned companies has increased marginally to 51.7 per cent in June this year from 51 per cent in June 2005.
Overall, promoter stake in top listed companies has declined to 48.9 per cent from 54.4 per cent 10 years ago.
This has been led by public-sector undertakings, as the government has divested its stake to raise resources.
The government’s stake in PSUs declined to 66.5 per cent on an average from a high of 78.2 per cent in June 2008 and 74.2 per cent in June 2005.
As PSUs remain the largest block on the bourses in terms of market capitalisation, their ownership pattern reflects on the entire universe of companies.
The global parents of listed multinational companies in India, however, were on a buying spree during the 10-year period, regardless of the underlying market conditions.
Promoter stake in listed MNCs rose nearly a quarter -- to 62 per cent from 49 per cent in June 2005.
Analysts attribute this to a spate of buybacks and open offers from global majors after the market regulator liberalised the takeover code in 2012.
MNCs’ efforts have been aided by record low interest rates in their home markets and a global rush for high-yielding emerging market assets.
A Business Standard analysis of BSE-200 companies has taken into account 153 companies whose comparable shareholding, market capitalisation and finances are available since 2004-05.
Promoter stake is calculated by adding the value of stake in these companies.
Of the 153 companies in the sample, 92 are family-owned, 31 are PSUs, 21 Indian subsidiaries of global MNCs and nine independent companies with no defined promoters.
The promoters of family-owned companies used the bear run on Dalal Street between 2010 and 2012 to raise their stake in companies.
The bulk of this increase happened between June 2010 and June 2012, when the stock market was falling.
The BSE Sensex moved in a narrow range during the period, from 16,300 to 17,500, providing promoters ample opportunity to raise stake through share buybacks and incremental equity funding of their capital-hungry companies.
But, in the past two years, when markets were rallying, promoters either cut their exposure or kept it unchanged.
Effectively, their stake came down by around 20 basis points in the two-year period, in line with the around 50 per cent rise in the Sensex.
Individual promoter and business family stake in the sample of companies is valued at around Rs 18 lakh crore (around $300 billion).
This has jumped more than five times in the past 10 years, rising at a compound annual growth rate of 20.9 per cent.
By comparison, the government's stake in top PSUs is valued at a little over Rs 9 lakh crore ($150 billion), while MNCs' investments in their listed subsidiaries is worth Rs 3.94 lakh crore (around $66 billion).
The combined market capitalisation of nine independent companies in the sample is Rs 9.6 lakh crore (around $160 billion).
Indian promoters' task was made easier by the cash provided by fast-growing dividend kitty of their key companies. In the past five years, promoters' income from dividend (in family-owned companies) grew at CAGR of 20.3 per cent.
This was clearly visible in the Tata group, where the holding company, Tata Sons, regularly invested in key group companies, thanks to its dividend income from Tata Consultancy Services, the largest dividend payer in the private sector.
Tata Sons now effectively controls 59.7 per cent of the group by market value, up from a low of 52.7 per cent in June 2007.
In last five years, Tata Sons' dividend income from the group's top-10 listed companies grew at CAGR of 24.2 per cent.
A similar trend was visible in billionaire Anil Agarwal's Vedanta Group.
There was a steady rise in promoter's stake in the group, with high profitability of key group firms like Hindustan Zinc and the erstwhile Sesa Goa. (now merged with Sterlite Industries to become Sesa Sterlite).
Buy comparison, promoter stake was down in financially-troubled or capital-hungry companies like Jet Airways, Shriram Transport, Bharti Airtel, Jaiprakash Associates, Motherson Sumi and JSW Steel.