Insider Trades for March 2024: Promoters Buy the Dip in These 5 Smallcap Stocks

The stock market has been rough on small and midcap companies lately, with their shares taking a tumble. This weakness has attracted some unlikely buyers: the promoters themselves. These company founders are using the dip as an opportunity to buy back their shares.

This is in stark contrast to the previous month, where promoter selling was more common.

While it's too early to say for sure, this promoter buying activity suggests a potential change in sentiment towards smaller companies.

Let's take a look at the five companies that have seen promoter buying in March 2024 so far.

#1 Man Industries

First on the list is Man Industries.

Man Industries is a flagship company of the Man Group, UK.

The company is engaged in manufacturing, processing, and trading submerged arc-welded pipes and steel products.

It offers longitudinal submerged arc welded line pipes for use in oil, gas, petrochemicals, fertilisers, and dredging.

Man Finance Private Limited, a promoter group entity of Man Industries so far, in March 2024, bought 52,225 shares.

This acquisition was made through four open market transactions, capitalising on an 18% downturn in the stock.

The upswing in momentum may also be attributed to the company's strategic venture into the expanding hydrogen market. Acknowledging the significant promise of clean hydrogen as a future energy solution, Man Industries has initiated the production of specialised pipes tailored for hydrogen transport.

This presents a massive opportunity, especially with the world moving towards net zero carbon emissions by 2050.

Further, the company has recently announced the successful completion of pipe testing for secure hydrogen conveyance.

This milestone for Man Industries was accomplished in Italy by RINA Consulting - Centro Sviluppo Materiali SPA, affirming the sector's leadership in ensuring the safe and efficient transportation of hydrogen.

Going forward, the company expects around Rs 40 billion (bn) top line in two years.

Man Industries has participated in massive bids for new businesses in domestic and overseas markets and expects to receive incremental orders in the coming months.

For more details, see the Man Industries company fact sheet and quarterly results.

#2 Praveg

Second on the list is Praveg.

Praveg is an advertising company with its core competence in exhibition and event management.

The company is also engaged in providing services to the hospitality sector.

It regularly organises exhibitions nationally and internationally, and the portfolio includes projects in the USA, China, South Korea, Africa, Europe and the Middle East.

In March 2024, the promoter group bolstered its ownership in the company through nine open market operation trades, securing 551,288 shares through 6 open market trades.

This can be attributed to the company's shares experiencing a 30% fall due to market correction.

Further, the buying can be attributed to the multiple order wins.

On 20 December 2023, Praveg recently bagged an order for the development, operation, maintenance, and management of at least 50 tents at Agatti Island, Lakshadweep.

The order involves building tents with cloakrooms and changing rooms, with commercial activities like scuba diving, destination weddings, corporate functions, and many more facilities on the island.

The company aims to have 50-60 resorts by 2028, with a focus on maintaining an asset-light model and expanding into new geographies.

By the end of FY29, the company is targeting 2,500 rooms (with a revenue potential of approximately Rs 4.5 bn). The average estimated capital expenditure per room is set at Rs 25 lakh.

For more details, see the Praveg COMM company fact sheet and quarterly results.

#3 Gokul Agro Resources

Third on the list is Gokul Agro Resources.

Gokul Agro Resources manufactures and trades edible and non-edible oil, meals and other agro products.

The company offers agro-based commodities under various product groups, including soybean, Palmolive, cottonseed oil, castor oil, oil cakes, and other agro-commodities. Its products include edible and non-edible oils and feed meals.

In March 2024, Ritika Infracon Private Limited, the promoter group, bolstered its ownership in the company through nine open market operation trades, securing 921,300 shares.

This acquisition increased its stake in the company to 0.7% as of 19 March 2024. The decision to augment holdings may have been spurred by the recent downturn in smallcap stocks, with Gokul Agro Resources, witnessing a nearly 20% decline in its value, presenting an attractive buying opportunity.

Additionally, another motivating factor could be the strategic move by its step-down subsidiary, Maurigo Indo Holding, to acquire a 25% stake in PT Riya Pasifik Nabati in Indonesia.

Notably, Gokul Agro Resources stands out among its peers with a low price-to-earnings ratio of 13 and a modest debt-to-equity ratio of 0.7. Looking ahead, the company aims to further trim its debt burden while enhancing profitability, positioning itself for sustainable growth in the future.

For more details, see the Gokul Agro Resources company fact sheet and quarterly results.

#4 Sarla Performance Fibre

Fourth on the list is Sarla Performance Fibre.

Beginning as a manufacturer of commodity yarns. The company has established itself as a manufacturer of specialised and higher value-added yarns.

Their strength lies in customising the product as per each requirement and specification. The company is a 100% EOU engaged in the manufacturing and export of polyester and nylon textured twisted and dyed yarns, covered yarns, high-tenacity yarns, and sewing thread.

In March 2024, Hindustan Cotton, the promoter group, increased its stake in the company through four open market operation trades, acquiring 85,431 shares. This move raised Hindustan Cotton's ownership from 56.5% in February 2024 to 56.6% as of 13 March 2024, amidst a 20% decline in the company's stock value from its March 2024 peak.

Another reason propelling promoters can be strong Q3 results.

Notably, in the December 2023 quarter, Sarla Performance Fibre witnessed an impressive 18.2% year-on-year revenue growth, reaching Rs 963 mi. Moreover, the company reported a substantial 300% surge in net profit, soaring from Rs 21 m to Rs 85 m.

Going forward, the company plans to expand its business, indicating a proactive approach to capitalising on new opportunities and ensuring future growth.

For more details, see the Sarla Performance company fact sheet and quarterly results.

#5 Star Cement

Last on the list is Star Cement.

Cement is a star cement manufacturing company in northeast India. The company plant is spread across 200 hectares of land in Lumshnong, a strategic location at Meghalaya that ensures easy availability of high-grade limestone.

The company has received a BIS License for the products being sold in the market. The company has developed a good image in the market since the launch of the product due to its superior quality.

In March 2024, Prem Kumar Bhajanka, a member of the promoter group, took action to increase its stake in the company. Through four open market operation trades, they acquired 289,470 shares. This move raised Prem Kumar Bhajanka's ownership from 10.1% in February 2024 to 10.2% as of 19 March 2024.

One reason for this increase in stake could be the company's strategic initiative to broaden its presence. If suitable opportunities arise at favourable valuations, the company intends to pursue acquisitions in South India. This region may offer relatively lower valuations for cement assets compared to other parts of the country.

Additionally, the recent decline in stock value by 20% from its peak presents an opportunity for bargain purchases.

Furthermore, Star Cement and its subsidiary, M/s. Star Cement Meghalaya, has been selected by Coal India Limited to procure 3.12 lakh tonnes of coal annually for ten years, supplementing their existing Fuel Supply Agreements (FSAs) in subsidiaries.

Looking ahead, Star Cement aims to capitalise on the anticipated surge in cement demand in East and Northeast India. To achieve this, the company is accelerating its expansion plans in greenfield and brownfield projects. By 2025-26, the total capacity is projected to reach 9.7 m tonnes per year.

For more details, see the Star Cement company fact sheet and quarterly results.

Conclusion

Investors may find it tempting to consider buying stocks when promoters of a company are actively purchasing shares. This behaviour is often interpreted as a positive signal.

Promoters, being insiders, symbolize confidence in the company's future, with their personal investments reflecting a shared commitment to long-term success.

The alignment of interests between promoters and shareholders is a favourable aspect, fostering a sense of collective dedication.

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.

Furthermore, the act of promoter buying may suggest a belief in the current undervaluation of the company's stock.

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.

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...