HDIL Shares Plunge 20%, Post Two Major Stake Sales

Shares of Housing Development Infrastructure (HDIL) plunged drastically in the last couple of days after two back to back major stake sales in the counter. On Tuesday (Jan 22, 2013), promoters and Managing Director of the company Sarang Wadhawan sold around 36.79 lakhs of shares at an average price of around Rs 114 per share. One day later, on Wednesday (Jan 23, 2013), the Citigroup Global market sold around 49.30 lakhs of shares through bulk deal at an approximate price of Rs 100.60 per piece. This resulted in panic among the market participants on the streets eventually leading the stock to tumble 20.35% to Rs 96.25 in the last two trading sessions. Even today the shares are moving southwards treading lower by 19.12% to Rs 77.85 per share.

With the selling of shares, Sarang Wadhawan would now be holding around 54.80 lakhs shares which account for 1.31% of the total shareholding against the earlier 2.19%. Total Promoter holding (including Sarang Wadhawan) is 37.36% as on Dec 31, 2012. One should further note that the promoters of the company have pledged shares worth 96.24% of their holdings.We believe that promoters have pledged a huge quantity of shares and these may create trouble going ahead. If margin call triggers then the party’s holding the shares may sell off creating more downside risk for the counter. 

According to media reports, after the panic on the streets, Sarang Wadhawan clarified that fund raised through the stake sale will be infused in the company for land acquisition and henceforth there won’t be any stake sale by promoters. We suppose that company has higher debt in its books and that is why the promoters might have opted for this route of raising funds. On a consolidated basis, total debt for the company stands at Rs 2743 crore, as on March 31, 2012. 

On the other hand, it is still unknown as to who bought Citigroup’s stake. Citigroup Global had around 46.10 lakhs of shares which account for 1.1% of the total shareholding, as on Dec 2012. We think that the Citigroup would have bought additional shares in Jan 2013 which combined make an aggregate 49.30 lakh shares which were sold yesterday. 

The counter, we believe, would now be very volatile in the near term and hence would advise our readers to stay away from the same. The company has not yet made any announcement on the Bombay Stock Exchange (BSE) regarding their Dec 2012 quarter numbers. Nevertheless, we would be updating on the same and hence would advise our readers to keep visiting our website regularly.