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Sintex Promoters "will buy 4% stake"? Why announce it earlier?


The promoters of Sintex “plan” to buy 4.78% and take their stake up to 40%, says MD Amit Patel in a post-earnings conference call.

Speaking to analysts at a post-earnings conference call on Tuesday, he said the current price of the stock is ‘excellent’ and the promoters, of whom he is one, could increase their stake to 40%.

He did not specify the price at which they will buy or the timeline for the purchases.

The stock closed 0.52% higher at Rs115.70 on Tuesday. At that price, buying 4.78% of Sintex will cost the promoters about Rs151 crore, pegging the market capitalisation of the company at Rs3,160 crore.

Sunil Kanojia, group president, Sintex, said promoters upping their holding in the company reflects the confidence they have in the company. “They are more comfortable with holding 40% and they have been raising their stake,” he noted. At the end of 2009-10, the promoter holding was 30.20%.

I don’t really get this. Why would you announce a purchase BEFORE you buy? The stock will run away. Typical promoter buys are announced about 10-15 days after the acquisition of shares. There needs to be a SEBI restriction that needs them to announce within a week, but that’s a different story.

But when promoters say they will acquire more shares from the market in the future, it makes me very suspicious. WTF?

In general, when people announce that they WILL do certain things, instead of actually doing those things, it makes me nervous. In the case of Halonix – an Actis run company – the company mentioned that it would demerge the auto and general lighting divisions and sell the auto-lighting unit which many people supposedly wanted. Yet, the fact that after eight months, they hadn’t done so was a major indicator of “what the F is going on?”.

Of course, if a company vehemently denies anything, it’s most likely true. Vijay Mallya, on October 11, denied categorically that he was selling his stake in Force India, his F1 team, to Sahara India. One day later, Force One sold 42.5% to, er, Sahara India.

The rules of the game are different; media announcements are being used to coerce action; action that is somehow not congruent with what the announcers should be doing.


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