Insider trading: Tata Sons buys, Yogi Deveshwar sells

Tata Sons, the holding company for the over $50-billion Tata Group, is picking shares of flagship companies like Tata Motors and Tata Steel at lower levels and consolidating its holding. On the other hand, YC Deveshwar, chairman of ITC, the cigarette-to-hotel conglomerate, sold shares as the prices continue to rally in a falling market.

The insider trading data reveal that over the past one month, Tata Sons has picked 1.5 million shares of Tata Motors and over 1 million shares of Tata Steel from the open market.

Life Insurance Corporation of India, the largest insurer, has taken some 900,000 shares of Tata Steel. The state-owned insurer has a 14 percent stake in the company.

The Tata Group holds less than 30 percent in both these group companies and had stated in the past that they would like to increase the holding. The Securities and Exchange Board of India (SEBI) has raised the minimum open offer limit to 25 percent from 15 percent previously. This has put many corporate managements on alert. Controlling shareholders have preferred to ramp up their holding.

[caption id=“attachment_83425” align=“alignleft” width=“380” caption=“Tata Sons has picked up 1.5 million shares of Tata Motors. Reuters”] [/caption]

Analysts point out though that the current surge in insider buying has got to do with beaten-down valuations. Since the beginning of the calender year 2011, the BSE Sensex and NSE Nifty have lost close to 20 percent in value. The Indian benchmark indices are among the worst performers in the world.

Company executives and insiders clearly believe that share prices are at an attractive valuation. NSE Nifty companies like Axis Bank, HDFC, DLF, JP Associates, Tata Motors and Tata Steel have witnessed insider buying over the past one month.

ITC and Kotak Mahindra Bank have witnessed net selling by insiders over the past one month. Here is a takeaway of company-wise insider trading activity:

Axis Bank: Axis Bank has witnessed a share price fall of 13 percent over the past one month. The NSE Nifty fell only 3 percent during the same period. The sell-off was also due to the uncertainty prevailing over the acquisition of the investment banking business of Enam Financials. Insiders have mopped up a small quantity of shares in the company.

HDFC: HDFC shares fell 3 percent over the past one month. Renu Sud Karnad , MD of the company, has taken about 200,000 shares while Deepak Parekh, chairman of the company, has picked about 500,000 shares. Keki Mistry, vice chairman and CEO, bought 101,000 shares.

DLF: DLF shares have outperformed the market. Over the past one month, insiders have picked 110,000 shares in the company. The company is selling off non-core assets that could bring in Rs 7,000 crore to the business.

JP Associates: Shares of Jaiprakash Associates have held firm over the past one month. The company is looking to induct a strategic investor in the cement business. Manoj Gaur, the company’s chairman, and Jaiprakash Power Ventures, a promoter group company, have bought close to 1 million shares of the company on 16 August, 2011.

Tata Motors: The resignation of Tata Motors CEO Carl-Peter Forster has taken close to 10 percent of the value of the company in a span of two days. He is expected to remain a non-executive director on the board of the company. Tata Motors shares have shed 13 percent over the past one month. Between 16-24 August, Tata Sons picked 1.1 million shares of the company.

Tata Steel: Tata Steel shares fell 3.7 percent over the past one month. Between 16-19 August 2011, Tata Sons picked 1 million shares of Tata Steel. The group holding company then picked another 510,000 shares of the steel major on 5 September, 2011. Concerns of a slowdown in the developed world ( read Europe ) is making the share price underperform, according to analysts.

ITC: YC Deveshwar sold close to 1.5 million shares of ITC over the past one month. This is at a time when the share price is trading a few rupees away from the 52-week high. In January 2011, he was a buyer when share price fell sharply. Institutional investors have been accumulating the share at a PE multiple (valuation) that is twice that of the whole market. It is turning out to be a play on the Indian consumption story.

Kotak Mahindra Bank: Kotak Mahindra Bank has witnessed an interesting trend in the case of insider trading. Over the past one month, insiders have sold 340,000 shares and bought 270,000 shares. This implies net selling by them. The company’s share price is up 4.7 percent against an overall fall in the benchmark indices. The BSE Bankex is down 7 percent during the same period. The bank, with its lean loan book, is able to pass on high cost of borrowing to customers. However, the insider trading activity clearly points to a rich valuation.