Out of all shareholders, promoters are the ones who know most about their businesses and the company’s future potential. If promoters are willing to invest their money by purchasing stocks from open market, there are high chances that they believe the stock is undervalued and should rise in the future. This is the main reason why investors are always willing to invest in stocks with higher promoters holding. Promoter is functional role more than legal designation.
Promoter is someone who is involved in making the company and is responsible for the overall functioning of the organisation. The company has investors and private limited company is allowed to have promoters, domestic investors, and foreign institutional investors. Public limited company can have retail investors apart from above-mentioned investors. Shares which are held by promoters are called as promoter’s stake or promoter’s holding. One thing which investors should keep in mind is that promoters are responsible for the overall success and growth of organisation. As a result, even experienced investors tend to invest in stocks with higher promoters holding.
Simply put, these stocks are considered safer to invest in comparison to those which have relatively lower holdings of promoters. The reason behind this logic is simple. If promoters/insiders of the company think that their company’s shares are worth buying, the possibility of that organisation doing better in the future is pretty high.
With this in mind, let us now have a look at stocks with higher promoters holding.
1. KDDL Limited
The company has been categorised as a leading company of India which is engaged in manufacturing watch components, high-quality precision stamped components and tools for range of engineering applications. It owns largest retail chain of luxury watches in the country with the help of its subsidiary, Ethos Limited.
In FY23, the company crossed major milestones in revenue and profitability, surpassing INR300 crores. Across FY23, it saw substantial ~40.7% growth in net sales in comparison to prior year, with each and every business segment exhibiting strong upward growth momentum. Export revenue of the company grew by impressive 56.8%, surpassing domestic revenue growth of 15.5%. Growth in export revenue was built on already enhanced foundation, as in the previous year, there was a 50.3% growth.
Major source of revenue for KDDL Limited was from watch components business, as it saw revenue growth of ~27.7%. This was contributed by domestic and exports revenue growth of 15% and 35.3%, respectively. This growth in revenue was over and above already enhanced levels of revenue growth of ~56.5% which was seen in previous year.
Another major revenue source was from the company’s precision engineering ‘EIGEN’ stamping and tooling business. In FY23, segment marked significant improvement of ~51.9%, surpassing growth rate of 34.0% which was achieved in previous year. During the year, KDDL Limited announced setting up of green field project for manufacturing of top-quality steel bracelets near Bengaluru, Karnataka. This will cater only to mid and high-end Swiss and European watch market and plant has been intended to be set up with capacity of ~100K steel bracelets p.a. and should start production in 2H24.
2. U Y Fincorp Ltd
U. Y. Fincorp Limited has been categorised as RBI-registered Non-Banking Financial Company. The company is mainly focused on providing inter corporate loans, personal loans and investments in securities and trading in securities. It offers its shareholders an opportunity to participate in diverse portfolio of investments and have access to stated investment process and investment experience of management team.
In FY23, the company saw revenue from operation of INR5,557.17 lakhs against INR8,366.58 lakhs in FY22, while net profit after taxation came in at INR774.54 lakhs against INR321.32 lakhs in previous year. Critical enabler of growth in today’s scenario needs increased operating efficiency, sustainability, customer satisfaction, improved capabilities and exploration of new market. Because of the company’s focus on diversification, it is engaged in expansion of its consumer loan business.
The company continues to build on its existing strengths, while at the same time, it envisages its business priorities to touch new horizons of growth and opportunities. Focus is on re-assuring stability and soundness in terms of overall business performance. In FY24, the company plans to increase its footprints in tier-3 cities of east UP, improve its BC engagement for deeper penetrations, automate technology platform for Mobile based loan for the purposes of instant credit, etc.
Within a year, the company’s promoters grew their stake by over ~5%.
3. Confidence Petroleum
The company manufactures LPG cylinders and supplies auto LPG in India with network of bottling plants and auto LPG dispensing stations throughout India.
FY23 saw intense tumultuous geopolitical and economic instability. Russia-Ukraine conflict impacted smooth functioning of international supply chains. However, despite such sort of challenges, the company delivered strong performance throughout its verticals by effectively serving customers. The company is now strategically positioned to amplify growth momentum.
During FY23, the company saw impressive financial results, stemming from strong revenue growth, better profitability and stable cash flows. Cash collections supported the company in improvement of cash flow along with sales ramp up and effective cost control measures. On consolidated basis, the company’s total revenue grew to INR2,20,883 lakhs for FY23 as against INR1,42,769 lakhs in previous year, exhibiting a rise of ~54.71%. The company’s net profits went up to INR8,814 lakhs in FY23 as against INR8,756 lakhs in FY22, up by 0.66%.
Promoters of the company are now bullish on the stock and they have added shares by purchasing from open market for 8 consecutive quarters.
Conclusion
Stocks with higher promoters holding or in which promoters are increasing their stake should be closely tracked by the retail investors. Increased promoters’ holding exhibit that goals of the management are in line with those of shareholders.
It’s natural for founders of the company to have deep and sound understanding of their business operations, business model, and growth potential. As such, if they decide to maintain significant stake in the company which they have founded, it clearly suggests vote of confidence in the company’s ability to create value in the long-term.
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