CEOs and promoters of India’s marquee companies may have a few tips for retail investors looking for cues to enter and exit the markets. Several top corporate honchos used the market rally in May and June this year to sell shares earned through ESOPs and book some profits.
The sale took place typically on days when everyone else was buying heavily — for instance on May 16, when the election results were announced and the Sensex jumped by a massive 6 per cent intra day.
Bombay Stock Exchange data show that the earning by 11 prominent corporate citizens from the bull run was Rs 138 crore. (The Indian Express considered sales of shares worth Rs 1 crore and above for the analysis.)
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Over the last four months, the Sensex has risen 24 per cent. Big names that sold shares in the companies they run include A M Naik of Larsen and Toubro, Keki Mistry & Renu Sud Karnad** of HDFC Ltd, Shikha Sharma*** of Axis Bank and Paresh Sukthankar of HDFC Bank.
Naik, chairman of L&T, sold the most — amounting to 3.45 lakh shares — which, going by the value of the shares on the date of sale, was worth more than Rs 60 crore. The L&T stock has risen 35 per cent between May 1 and June 9, when it closed at Rs 1,752 per share.
Over the past two years, as the markets tanked, promoters and senior executives largely held on to their shares. Retail investors, on the other hand, have begun to move into the market only now, when the markets are booming.
As per BSE data, on May 1, 2014, total buy orders in the retail category were only Rs 153.78 crore. But as of June 17, they had jumped to Rs 18,744 crore.
Renu Sud Karnad, MD of HDFC Ltd, sold 2,08,277 shares from her holdings in the period between May 16 and June 10, earning over Rs 19 crore. Keki Mistry, vice-chairman and CEO of HDFC Limited, sold 1,55,000 shares between May 16 and June 9 for around Rs 14 crore.
Shikha Sharma, MD and CEO of Axis Bank, sold shares worth Rs 7.9 crore between May 16 and May 26. Romesh Sobti, CEO and MD of IndusInd Bank, sold 1,45,000 shares worth Rs 7.8 crore.
Senior employees at most private sector companies earn shares of their companies under the employees stock ownership plan (ESOP). They can purchase the shares at a predetermined price, and are then free to sell them in the market after the expiry of the lock-in period, if there is one.
As the bull phase tapered after the first week of June, the sale of shares by company chiefs too dwindled.
**An HDFC spokesperson said “both Mistry and Karnad sold the shares to exercise ESOPs and have used the money to purchase more shares as there is an exercise period for the same. Both have bought far more shares than they sold. The only way such professionals can raise money to exercise Esops is by selling shares.”
***An Axis Bank spokesperson said “the transaction referred to pertains to sale of ESOPs undertaken by employees of the Bank in the normal course, Further, the proceeds from the sale of such shares are, many a times, used by employees to purchase additional exercisable ESOPs due to them, which has been done in case of the referred transaction.”
Disclaimer: The last two paragraphs were added after the story appeared in print.