Promoter holdings remain same as India pharma battles rough seas

In the past two years, pharma stocks have come off their record highs as investors steadily dumped them in wake of worsening regulatory and pricing challenges. Meanwhile, what did the promoters do? Did they increase stake, reinforcing their confidence in the business, or did they too emerge as sellers to salvage their returns in a falling market? The finding: most didn't do either of these.
An analysis of the trend in the promoter stake of the top 20 pharma companies by valuation over two years shows that promoters have neither been bullish, nor lost faith in their businesses. In 65% of the companies, the promoter stake has remained unchanged. In only two of the 20 -Dr Reddy's Laboratories (DRL) and Strides Shasun -promoter stakes have increased marginally. Promoter stake in five companies -Aurobindo Pharma, Biocon, Glenmark Pharma, Natco Pharma and Alembic Pharma -declined marginally between Q4FY15 and Q4FY17.

During this period, a 9% fall in promoter holding in Sun Pharmaceutical is due to Daiichi Sankyo selling its entire stake in the company in April 2015, which in hindsight seems to be a sound decision, considering the stock has lost half its value since.

Last year, there were efforts to bolster investor confidence by companies like Sun Pharma and DRL that announced buyback offers -an aspect that again in hindsight offered a good exit opportunity to short-term investors.

For now, like the investors of pharma companies, the promoters are, too, keeping their fingers crossed.