Institutional investing – companies riding on the tide

An increasing number of Indian companies have been selling shares to institutional investors in FY16 to raise money and pare debt. Institutional ownership refers to the ownership stake in a company that is held by large financial organisations, pension funds or endowments. Institutions generally purchase large blocks of a company's outstanding shares and can exert considerable influence upon its management and stock price movement as well.

We have analysed over 4000 companies and picked up top five companies according to the companies’ institutional ownership numbers over the last three quarters of FY16. We have observed that since Sep-2015 (Q2FY16), the institutional investor count in companies has increased from single digit to double/triple digit numbers. 

Dolphin Offshore Enterprises (India) Ltd. had only 2 institutional investors involved in its share holding pattern in Q2FY16 but eventually gained the trust of big investors and the number of institutional investors has increased to 520 in Q3FY16 and again slightly slipped to 462 in Q4FY16. In Sep-2015, stock of Dolphin Offshore Enterprises was trading at 98.80` per share and in month of Dec-2015 and Jan-2016 share price reached high of 139` per share with returns of 41.83 per cent. In Sep-2015, Dolphin Offshore Enterprises was trailing at TTM PE of 5.86x and increased to 11.47x in Dec-2015. Institutional investors have grabbed the opportunity when the stock was undervalued as per data.

Vivid Global Industries has risen to 60 institutional investors in Q4FY16 as compared to 1 in Q2FY16. In Sep-2015, stock was attractive at TTM PE of 7.57x which increased to 11.30x in Q3FY16. In March-2016, TTM PE is at 9.97x. In Dec-2015, stock price went up to 10.4 per share from 7.58 per share in Sep-2015. 

When we sneak into Balaji Telefilms, we observe that stock price has risen to 139 in Dec-2015 from 103 per share in Sep-2015 with returns of 34.95 per cent. Company was trailing with TTM PE of 24.40x (Sep-2015), which decreased to 20.11x (Dec-2015) and further reduced to 19.13x (Mar-2016) after increase in institutional shareholding.

Times Guaranty’s institutional investor numbers surged to 212 in Q4FY16 as compare to 8 in Q2FY16. In Sep-2015, stock price was 19.25 per share and in Dec-2015 it rose to 24.75 per share. In Mar-2016, scrip was trading at 17.25 per share with TTM PE of 61.69x. CMP of the company is 19.50 per share.

Same price trend is being observed in Keerthi Industries. During Sep-2015 (166); Dec-2015 (243); and Mar-2016 (140). Keerthi Industries Institutional investor numbers were ramped up to 125 in Mar-2016 quarter from 5 in previous two quarters. Company was at attractive position with TTM EPS of 53.32x (Sep-2015), 56.17x (Dec-2015) and which moderated to 24.84x (Mar-2016). 

With the euphoria of institutional investors buying the stock, the stocks have spiked up and eventually moderated with profit booking.