Mid-cap companies raising money through promoters, investors
In the last five days, at least five mid-cap companies, DCW Ltd, Lyka Labs, Sical Logistics, Strides Arcolab and Bsel Infrastructure have announced preferential allotments, reports Suprotip Ghosh.business Updated: Jun 13, 2007 21:15 IST
Many mid-cap companies have started raising money by placing equity with promoters or other investors. This could either mean that mid-cap companies, which have been performing below par for over a year now, are likely to see a turnaround. Or it could be a play by promoters to enhance the value of their companies in the stock market, feel market watchers.
In the last five days, at least five mid-cap companies, DCW Ltd, Lyka Labs, Sical Logistics, Strides Arcolab and Bsel Infrastructure have announced preferential allotments.
According to finance ministry guidelines, “Preferential Allotment” includes issue of shares on preferential basis through private placement made by a company, and issue of shares to the promoters and their relatives either in public issue or otherwise.
This trend points towards a renewed interest in mid-cap companies, say market watchers. “Valuations of mid-cap companies are very attractive today, and promoters want to harness this special interest to fund their growth plan,” said Deven Choksey, MD, KR Choksey Securities.
Most of these companies are doing very well and are on active expansion mode, said Choksey. “They are leveraging the valuations,” he said.
However, other experts say that promoters may also be picking up preferential shares to get a premium on the stock prices of the companies. These companies want to get a premium on their stock prices that are performing below the benchmark BSE Sensex and Midcap indices, said Rajiv Sampat, independent financial analyst.
Promoters picking up stake mean they want to get a premium on the price of their stock that is not doing too well.
“One reason why a promoter could pick up more stake is to extract a premium on their holding in the company. If there are lower amounts of a share in the market, its value may move up,” Sampat said.
He too said that the mid-cap story has been flagging of late in the Indian stock markets. This is due to a lack of low priced stocks in the market. One reason why mid-cap stocks were attractive was because they were cheap, and gave promises of better returns than large stocks like ONGC or Reliance Industries Limited.