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Commentary

Insiders Buying The Big Dip

Corporate India is betting on itself. The level of insider buying has reached dizzying heights in the last two months, with more than 20 announcements a day. Insider trading regulations require that promoters tell the exchange when they buy or sell shares, even if they buy 1 more share. Prominent insider buying noted in:

KS Oils: Ramesh Chand Garg, a promoter and chairman of the oil manufacturer, has bought nearly 4% of the company since Jan 2008, spending nearly 80 cr. according to my calculations. The price is at Rs. 62 or such, P/E around 15.

IndiaBulls: The brokerage and financial service provider has been hit hard, falling to Rs. 388 from 1,000 in Jan. Saurabh Mittal, Sameer Gehlaut and Rajiv Rattan, the three founders, have bought a HUGE number of shares since Jan, and my conservative calculations show they have put in nearly 300 cr. altogether in buying shares from the Market, since Jan. The P/E is around 14-16 on a trailing basis.

Man Industries: Ramesh Mansukhani has bought shares little by little, bit by bit. I haven’t calculated how much – this is probably not more than 20 crores – but it’s good to see. The share is at Rs. 108, P/E around 7.5.

Apart from these, REL is buying back shares (price of 1600 max), lots of small company directors are buying (but very small amounts). At Moneyoga we’re trying to get this all together so we can see significant purchases over a period of time.

Some information may be misleading – for instance Deepak Parekh of HDFC sold about 15 crore worth shares recently, but it looks like that is just an FBT offsetting transaction (he got shares worth nearly 50 cr. as ESOPs, for which he would be liable for FBT). But it’s interesting all the same.

  • Anonymous says:

    >The link to Man industries points to IndiaBulls. Please correct it.

  • Anonymous says:

    >Speaking generally;

    There have been times when insider buying proved successful and times when their prices fell for reasons beyond their control.

    Despite knowing the strengths and weaknesses of their companies, what they don’t know is how their business will be affected by external shocks.

    In the present times with shocks bankrupting large companies like Bear Sterns or ICICI’s subprime writedowns etc. I don’t think some of these moves can be called wise. Seems more like gambling or enticing the foolish to prop up the value of their stock so that large holders (FIIs) don’t off load.

    Time will tell.

  • Nilesh says:

    >Feedback – http://www.moneyoga.com/stock.aspx?s=MUDRA

    for mudra life style, EPS data does not match. net profit has increased and EPS has decreased (with same # of shares). also it does not match with moneycontrol.

    not sure if you are including # of warrents promoters have recently allotted to them.

    whats your take on mudra lifestyle. selling below book value with PE of approx 4.

  • Nitin Rao says:

    >This is a very good observation. And K S Oils has always been good fundamentally. Even Citigroup invested in it much early than it caught the fancy of the market.

    Nitin @ My 2 dimes

  • Anonymous says:

    >Q is do you recommend buy and more important did u buy any of these?

  • Deepak Shenoy says:

    >nilesh: will check Mudra. There is a rework of the financials that will happen. Mudra looks pertty good actually at P/E of less than 5! Still, textiles and garments is probably not a great growth business in these times, specifically exports.

    anon: No I am not yet buying. Bad news isn’t yet over, I think. But I am getting the feeling we may be in for some drop in volatility.