Is High Promoter’s Holding a Good Sign?

  • by THO
  • 1 week ago
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When it comes to investing in shares, one of the most important factors to check is the company’s management and its promoters. Efficient management with its promoters having integrity can take the company to new heights, alongside building consistent wealth for the shareholders.

If you look into the Promoter’s Holdings of Top Tata Group Companies, they hold a good stake in most of their big firms. For example, here is the promoter’s holding in the top tata companies: Tata Motors (NS:) (46.41%), TCS (NS:) (72.19%), Tata Chemicals (NS:) (37.98%), Tata Steel (NS:) (34.41%), Tata Power (46.86%), and Titan (NS:) Company (53.90%) (Source: Trade Brains Portal). 

On the other hand, there are companies like ITC (NS:), HDFC (NS:), Yes Bank (NS:), ICICI Bank (NS:), Larsen & Toubro (NS:) (LT), IDFC (NS:) Ltd, Ujjivan Financial Services, Federal Bank (NS:), UTI AMC Ltd, etc which has Zero Promoters holdings and mostly are Professionally managed with hired management and CEOs. What to say about these companies with Zero Promoter’s holding? Is high Promoter’s holding in a company is good or not required?

Well, looking into the Promoter’s Holding, here are a few points that can help you make your investment decisions:

  1. A high stake in the shares of the promoters is a positive sign as it shows the confidence of the promoters towards their own company.  
  2. Although a high stake of promoters is favorable for the company, however, a very high holding by the promoters is not very favorable. A moderately high diversified holding and a good presence of the institutional investors indicates that the promoters have little room to make and carry out random decisions which may hurt the shareholder’s interests.
  3. Even with high promoter’s shareholding, in case of the holdings of the promoters changes (increases or decreases), the investors should pay attention to the purpose and method of the shareholding pattern change.
  4. If the shareholding of the promoters increases, it can be taken as a positive sign. This means that they are optimistic and confident about the company’s growth.
  5. If the Promoter’s shares are continuously decreasing without any clear reason, then you might need to investigate further and take cautionary actions.

Overall, a high promoter’s holding in a company is considered good as long as the management is integral and efficient. The trend of Promoter holding is an important factor to check for investors as they are the insiders of the company with a clear understanding of the business plan, growth prospects, and vision.

Do you invest in companies with very low Promoter’s shareholding? Do let me know in the comment section below. Happy Investing.

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