Insider Alert: Top 5 Stocks Where Promoters are Increasing their Stake

When promoters of the company buy shares of their own business, investors consider it as a powerful sign.

Promoter buying usually indicates that the company may be undervalued or that promoters know something big is going to happen, so they lap up shares beforehand.

It means that the promoters, who built the company from the ground up, are once again putting their own money on the line.

It's a huge vote of confidence!

Did you know that Indian regulations allow promoters to buy up to 5% of their company's shares annually through the open market?

In 2023, promoters across 100 companies went on a buying spree, investing a whopping US$ 450 billion (bn).

Here's the truly exciting part! In at least 20 companies, promoters increased their share by over 1%. This is a significant chunk, showing a deep commitment to the company's growth potential.

In fact, promoters are leaving no stones unturned... take for example the current fall in Indian stock market.

Seeing the opportunity in the beaten down share prices, BSE data shows that these promoters bought shares from the open market.

Company	Name of Promoter who Bought Stake	Category
Sarla Performance	Hindustan Cotton Company	Promoter Group
Glenmark Life Sciences Ltd	Nirma Limited	Promoter
Bharat Wire Ropes Ltd	Gyanshankar Investment & Trading	Promoter
MRP Agro Ltd	Manish Jain	Promoter
Updater Services Ltd	Raghunandana	Promoter
Praveg Ltd	Vishnukumar Patel	Promoter & Director
Ramkrishna Forgings	Riddhi Portfolio Private Limited	Promoter
Som Distilleries	Jagdish Kumar Arora	Promoter
Nahar Polyfilms	Nahar Spinning Mills	Promoter Group
NINtec Systems Ltd	Niraj Gemawat	Promoter & Director
Crestchem	Dipak Patel	Promoter & Director
Kamat Hotels	Plaza Hotels Private Limited	Promoter Group
Ashapura Minechem	Ashapura Industrial Finance Limited	Promoter Group
High Energy Batteries	Seshasayee Paper & Boards	Promoter
Prakash Steelcage	Prakash Kanugo	Promoter & Director

Data Source: Equitymaster

With most of the companies having reported their December 2023 shareholding pattern, let's look at the top 5 stocks which saw the maximum promoter buying.

In fact, these companies have now seen their promoter holding go up for the past 4 consecutive quarters.

#1 Lakshmi Automation Loom Works

First on our list is Lakshmi Automation.

Founded in 1973, the company manufactures spares and accessories for weaving and knitting machines.

As the need for sophisticated and high-end weaving machines grew, the company expanded its portfolio to high-speed automatic C-type weaving machines, air-jet weaving machines, circular knitting machines, and more.

Apart from that, the company also provides warehousing rental and engineering services.

The company's net profit for the December 2023 quarter surged by 21.7% as healthy demand aided sales.

The promoters of the company have been increasing their holding steadily since March 2021, and it currently stands at 35.58% as of December 2023, up from 32.7% in 2021.

Skin in the Game

Data Source: Equitymaster

The company is actively expanding its warehousing space, signalling its commitment to growth.

It is also strategically increasing its supply of weaving and textile machine spares and accessories, catering to domestic and overseas customers.

This broadens its market reach and potential for revenue growth.

While there is always a risk of rising input costs impacting profit margins, the company has a strong management at helm and its focus on expansion looks promising.

To know more, check out Lakshmi Automation's latest shareholding pattern.

#2 Zydus Wellness

Second on this list is Zydus Wellness.

Zydus Wellness, previously known as Carnation Nutra-Analogue Foods, is a subsidiary of Zydus Lifesciences, founded in 1994.

Some of the company's well-known brands are Glucon-D, Sugar-Free, EverYuth, Complan, Nycil, Sugarlite, Nutralite, and Sugar-Free D'Lite.

While the company has posted weak quarterly earnings in recent quarters, it aims to double sales within the next few years.

Fuelling this growth is their focus on innovation. New product categories across their popular brands like Complan, Sugar-Free, Everyuth, and Nutralite are planned for launch in the coming quarters.

The company's promoters are constantly increasing their stake. Their holdings have steadily grown from 64.8% in March 2022 to 69.15% as of December 2023.

Zydus Wellness shareholding

Data Source: Equitymaster

The company aims to expand its reach from 2.9 million retail outlets to 3.5 million, particularly focusing on smaller towns with lower population densities.

This 25-30% increase in reach will unlock significant sales potential.

Complan, a household name in India, is receiving renewed attention of late. Zydus is putting resources into enhancing this established brand alongside exciting new launches planned for the upcoming year.

In 2019, Zydus acquired the well-respected Heinz India business, further strengthening its brand portfolio.

Zydus is also exploring successful product lines like Sugar-Free chocolates, cookies, and spreads from international markets, with the potential to launch them in India.

R&D is a top priority for Zydus, ensuring a steady pipeline of innovative products.

They have the production capacity in place to meet the demands of their ambitious growth plans for the next 3-4 years.

#3 Incap

Next company on this list is Incap (India).

Incap is a subsidiary of Incap Corporation. Three development companies were merged to form Incap India. It grew to become a contract manufacturer of electronics and furniture.

The company's Tumkur factory is popular for its power electronics manufacturing capability.

Incap reported a revenue degrowth of 46% YoY in the December 2023 quarter. Consequently, the net profit also declined.

Increased inventory levels were a common problem for the whole market, which resulted in pricing pressure.

Incap faced the full brunt of this impact during 2023's final months.

The company's largest customer reduced inventory levels. The lower utilisation ratio of the Indian plant also affected its profitability.

However, the company made a lot of new investments in 2023, which could turn to fruition soon. In India, it started production in the third factory.

While the increase in promoter holdings is small, promoters have consistently added stake for the past six quarters.

Incap Shareholding Pattern

Data Source: Equitymaster

Since establishing its full-fledged production facility in Tumkur, the company is tapping into the growing market with cost efficiency and competitive pricing.

With a total floor space of 26,500 sq m across its three factories, Incap demonstrates its ability to scale production while adhering to lean manufacturing principles for optimal efficiency.

#4 Laffans Petrochemicals

Next on this list is Laffans Petrochemicals.

Laffans Petrochemicals trades in chemicals and active pharmaceutical ingredients (APIs), and commodities arbitrage. It was established in Gujarat in 1992.

The company specialises in ethylene oxide derivatives. The chemical products derived from petroleum are used for several consumer products like plastics, rubber, paints, fertilisers, etc.

After facing a loss of Rs 17 million (m) in 2022, Laffans Petrochemicals managed to swing into profitability in 2023 with a profit of Rs 79.4 m.

The company is actively leveraging its industry experience to explore new opportunities for indenting and trading chemicals.

It has also begun strategically importing chemicals from Dubai in the last financial year, diversifying its sourcing strategy.

Promoters of the company have been steadily increasing their stake, with holdings rising from 59.87% to 60.35% in the December 2023 quarter.

Laffans Petro Shareholding Pattern

Data Source: Equitymaster

While import challenges like pricing fluctuations and transit times exist, the company is capitalising on the rising demand for speciality chemicals and favourable government policies.

#5 NRB Bearings

Finally, we conclude this list with NRB Bearings.

Founded in 1965 in Mumbai, NRB Bearings is the first company in India to manufacture needle roller bearings.

The company now offers a wide range of bearings, including a new generation of lightweight drawn cup bearings.

They also provide a complete friction solutions package and customised bearings catering to industrial users.

NRB Bearings delivered impressive results in the December 2023 quarter.

Its consolidated net sales grew by 2.9% YoY, reaching Rs 2.6 bn.

But the real story lies in its net profit, which skyrocketed a staggering 622.8% YoY to Rs 1.7 bn!

NRB Bearings' promoters are demonstrating confidence in the company's future by steadily increasing their stake. Their holdings have grown from 50.63% to 50.67% in the December 2023 quarter.

Promoter Holding on the Rise

Data Source: Equitymaster

The company is taking steps to de-risk its business by reducing dependence on domestic sales.

They're actively restructuring their international business for future growth.

The recent sale of a 6.4-acre land parcel in Thane to Oberoi Realty for Rs 2 bn demonstrates their ability to monetise non-core assets.

A fire at their Waluj plant did impact their topline by 5%, but with new machinery arriving, they expect supplies to normalise in the next quarter.

The company also successfully navigated challenges like material input shortages and rising prices.

NRB Bearings is experiencing growth in both the commercial and passenger vehicle segments, indicating a strong market fit for their products.

Snapshot of Companies with Rising Promoter Holding

Here's a snapshot showing the above companies and more, with their important parameters.

Source: Equitymaster Screener

Please note that these parameters can be changed according to your needs. Check out our powerful screener for more such screens.

You can also take a look at the below video where lead smallcap analyst Richa Agrawal talks about six smallcap stocks with insider buying in the past one month.

In Conclusion

In recent months, nearly 100 companies have issued convertible warrants or preferential allotments to promoters.

This means founders are actively increasing their ownership stake.

This trend of promoter buying is typically associated with a positive outlook, driven by various factors such as strong financial results, anticipated growth, new product launches, or favourable industry trends.

Despite these tempting signals, it is crucial for investors to approach such situations with careful consideration and conduct comprehensive research.

Promoter buying is just one aspect of the overall investment landscape, and a thorough analysis of market conditions, company fundamentals, and industry trends remains essential for making informed decisions.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...