IT firms’ promoters cashing in on bull run

Some of the investors and promoters are offloading minority stake in Indian IT firms on the back of bull run in the Indian market. However, the participation remains low in technology companies as compared to other firms as IT index has not seen much upside as compared to other indices - Mumbai-based analyst tells Bizz Buzz

Bengaluru: Large investors and promoters of Indian IT firms are joining the promoters of other domestic companies in offloading minority stakes in their companies amid the bull run in the stock market.

On Friday, the US-based Fidelity Investments’ funds have offloaded shares in HCL Technologies worth Rs1,788.27 crore in a block deal on NSE. According to data available, more than 1.24 crore shares were sold at Rs1,440.5 each, amounting to 0.46 per cent of the total shares of the company.

Similarly, promoter of Happiest Minds Technologies offloaded minority stake last week. Its promoter and Executive Chairman, Ashok Soota offloaded a six per cent stake (91,36,490 equity shares) in the open market through a bulk deal.

“This is to inform you that I, Ashok Soota, Promoter of Happiest Minds Technologies have sold 91,36,490 equity shares (six per cent) in the open market through bulk deal on June 25, 2024,” the company said in an exchange filing. In total, 8.3 per cent equity worth around Rs 1,076 crore changed hand, exchange data showed.

“Some of the investors and promoters are offloading minority stake in Indian IT firms on the back of bull run in the Indian market. However, the participation remains low in technology companies as compared to other firms as IT index has not seen much upside as compared to other indices,” a Mumbai-based analyst told Bizz Buzz.

Indian equity market has seen a slew of offloading of stakes by promoters as the broader market continues its bull run.

According to Prime Database, Indian promoters have offloaded stakes worth Rs62,000 crore in the first six months of 2024. This was the highest in the last five years. In 2023, promoters had raised Rs61,277 crore through stake sale in the entire year.

In the past two months, promoters of more than 200 companies have cumulatively sold stock worth more than Rs33,000 crore. Analysts are of the opinion that concerns over valuations in the Indian market have been prompting promoters and large investors to cash in part of the uptrend.

Interestingly, many of the stake sales have happened in the small- and mid-cap space as promoters are taking part profits on the back of the recent bull run in this space.

“It is likely that promoters and large investors will continue to book profits on these high levels. However, it may not happen as much in the IT stocks space as the index has been an underperformer since last year. There is less valuation concern with regard to IT space,” said the analyst.