Market Guru Anil Singhvi has recently spotted a fresh trend where foreign promoters offload their holding in Indian multinational firms (MNCs) at deep discounts.
Though the exits are permissible, Singhvi cautions that they are damaging retail investors who end up getting stuck at the higher levels, oblivious to the impending offloads.
Foreign promoters exiting Indian stocks — what’s happening?
A number of MNC promoters have been selling huge stakes in the past few months through block deals and Offer For Sale (OFS), at 10 to 40 per cent discounts compared to current market prices. Shares such as Wendt India, Whirlpool, GE T&D, and Timex Group India have witnessed big stake sales. Even in the Hyundai India IPO, the foreign promoter offloaded a stake of 17.5 per cent — the listing was below the issue price.
It’s the retail investors who get the worst of it, says Singhvi. These investors purchase such stocks during the bull run on their firm’s MNC branding and apparent safety. But the moment a significant promoter sell-off is signalled, the stock price corrects strongly, losing its capital.
What’s fueling these stake sales?
Anil Singhvi identifies four reasons:
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Mismatch in valuation: Indian subsidiaries are quoted at PE multiples 3-10 times higher than their foreign parents. i.e: Nestle India is quoted at 75.2x compared to Nestle S.A. at 18.2x
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Global capital requirements: Parent corporations are raising capital by exiting high-value Indian arms.
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Indian liquidity surplus: The depth of Indian markets facilitates such exits.
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Premium on governance: MNCs enjoy rich valuations due to trust and transparency — promoters are monetising this.
Retail investors face the biggest risk
Large stake sales often trigger steep price drops, causing mutual funds’ NAVs and retail portfolios to suffer. Singhvi cautions investors to stay away from MNC stocks trading at extreme valuations — especially those above 60–70x PE.
Singhvi’s recommendations
Singhvi suggests that SEBI must regulate open market sales by:
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Placing a cap on the amount of stake that can be offloaded through OFS or block deals
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Restricting the discounts given below market price
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He is citing the example of Akzo Nobel–JSW Paints deal where JSW provided a retail investor premium in an open offer after acquisition.
Investor takeaway
Promoter exits are a part of market action, but caution is advised by Singhvi. Exit MNC stocks trading at unwarranted valuations if you feel promoter action is fermenting. Avoid letting brand confidence overrule valuation discipline — this, he states, is the way to safeguard wealth in the current market.
