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- Promoters Are Cashing Out: Should You Worry?
Promoters Are Cashing Out: Should You Worry?
Yash Upadhyaya
August 07, 2024
Tale of the Tape
Hola Amigos. Markets snapped their three-day losing streak
Nifty and Sensex gained over a per cent each tracking the recovery in global markets. Midcaps (+2.5%) and Smallcaps (+2.9%) rebounded with a roar. 432 stocks in the NSE 500 ended in the green! Check out the Stocktwits Sentiment Meter:
It was a sea of green across sectors. Oil & Gas (+3.1%), Metals (+2.7%) and Pharma (+2.2%) were the top winners.
Promoter selling is a red flag, but how much should it matter in a bull market? Read our top story to find out more.
PB Fintech (+6%) gained after a blockbuster Q1 performance. Lupin hit a 52-week-high on a solid Q1 show. More details below.
ONGC, Cummins India and Fusion Micro Finance all saw big movements today. Check out their charts below to find out why.
Results reaction. Gland Pharma fell -4% after its Q1 net profit slumped -26% YoY. Meanwhile, Chambal Fertilisers gained +5% after its bottomline jumped +32% YoY
Suzlon Energy was locked in a +5% upper circuit after acquiring an energy services firm for Rs 660 cr.
NMDC (+3%) was in focus after reports said it cut lumps & fines prices by Rs 600 and Rs 500 per tonne.
Alembic Pharma was up +3% after getting a USFDA nod for a psoriasis treatment drug.
Ramco Systems was locked in a +10% upper circuit after its aviation software was selected to be used in Canadian air bases.
Here are the closing prints:
Nifty | 24,298 | +1.3% |
Sensex | 79,468 | +1.1% |
Bank Nifty | 50,119 | +0.8% |
Market
Quit While You’re Ahead?
With markets hitting all-time highs, promoters and PE firms have been cashing out. ICYMI - promoter selling has crossed $10 billion in 2024 so far, the HIGHEST in five years. Normally this is a sign of doom as it signals the ‘top’ of a market and means owners have less ‘skin in the game’. While true, it doesn’t mean everything has to go downhill. Here’s a quick list that shows otherwise.
1) Whirlpool of India promoters sold a 24% stake in February. CEO Marc Bitzer said that while they were still bullish, valuations were way too high. The day they sold, the stock was at Rs 1,250 p/sh. Since then, the stock is up a whopping +65%.
2) Sumitomo Wiring sold a 4.4% stake in Samvardhana Motherson in March at an average price of Rs 121 p/sh. Since then, the stock has gained over +45%.
3) Blackstone sold a 15% stake in Mphasis in March. In the last five months, the stock is up +15%.
4) Cipla promoters sold a 2.5% stake at an average price of Rs 1,345 p/sh in May. After that, the stock has gained +15%.
Big Picture: No, this doesn’t mean that every promoter stake sale will result in the stock flying. For example: IndiGo’s Rahul Bhatia sold a 2% stake in June and the stock has been flat. And yes, a lot of the gains on the list are due to the crazy bull rally. Always be wary of high valuations and book profits based on your risk appetite. But also keep in mind as investor Deepak Shenoy said in May: “I think the risk is on the upside, not the downside. Meaning that not participating (by selling/not investing) has a risk too.”
Specials
Vijay Kedia Portfolio Changes
Who doesn’t want to know which stocks legendary investor Vijay Kedia is currently holding? In this video, we cover his top holdings and latest portfolio updates along with fundamental and technical views on the same.
Earnings
Earnings Roundup
Lupin (+4%) hit a fresh 52-week-high after its Q1 results beat Street estimates! A +25% YoY sales jump in its US market helped boost the topline. New drug launches helped offset weaker pricing in some key products to juice up operating margins. Fun fact: North America has now seen eight consecutive quarters of EBITDA improvement!
Here is its Q1 report card:
Revenue: Rs 5,600 cr; +16% YoY (vs Est: Rs 5,146 cr)
EBITDA: Rs 1,241 cr; +23% YoY (vs Est: Rs 1,018 cr)
EBITDA Margin: 22.2% vs 17.8% YoY
PAT: Rs 801 cr; +77.2% YoY (vs Est: Rs 565 cr)
Big Picture: It’s still early days yet, but most pharma stocks have been bouncing back after a disappointing 2023. FYI - Lupin has a strong pipeline as well, with 40+ injectables and 20+ inhalation products in the offing. Let’s see how this goes.
Lupin is +51% YTD.
What’s your view on the stock? |
PB Fintech’s (+6%) Q1 results were OUTSTANDING. The company reported its third-straight quarter of profit, a huge W. The real star, for some time now, continues to be its insurance vertical which saw a +78% YoY growth in new health & life insurance business. Its ‘renewal revenue, which operates at +85% margins, hit an annual run rate of Rs 559 cr vs Rs 418 cr last year, which majorly boosted the bottomline.
Big Picture: The company has joined the pack of new-age tech firms that are able to turn a consistent profit. While its credit biz has seen a slowdown in growth due to the RBI’s general crackdown on unsecured loans, it still has maintained its profitability, which is a big positive.
Here are its Q1 stats:
Revenue: Rs 1,011 cr; +52% YoY
Adjusted EBITDA Margin: 5% vs 3% last year
PAT: Rs 60 cr vs Rs 12 cr loss last year
PB Fintech is +90% YTD.
Charts
Chartbusters
Here are three companies that saw big movements today:
1) ONGC was the top Nifty gainer after posting its Q1 results. Tbh, the headline numbers weren’t great, with its net profit declining -15% YoY. But its Q1 EBITDA beat Street estimates on lower expenses + reduced raw material prices. FYI - Jefferies has upped its target price to Rs 410 p/sh (vs Rs 390 p/sh earlier), citing attractive valuations and a key ramp-up in KG production in Q3.
2) Cummins India was up +7% intraday after its Q1 numbers beat Street estimates! The real star was its EBITDA margins jumping to 20.3% vs 15.4% last year. The bullish management commentary for FY25 also boosted sentiment. Senior execs expect double-digit revenue growth for the rest of this fiscal.
3) Fusion Micro Finance hit a -20% lower circuit after posting awful Q1 numbers. It reported a loss of Rs 36 cr vs profit of Rs 120 cr last year. Asset quality also took a BIG hit. Finally, Motilal Oswal also downgraded the stock, citing high credit costs. PS - the stock has now fallen below its IPO price of Rs 368 p/sh. Yikes.
Check out their charts below:
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