Reasons Behind Promoter Buying
Hi friends, my name is Sri Krishna Let me ask you a question: Why would a company’s promoter buy its own company’s stocks from the market? There could be various reasons. Number one is that they may find that the valuations of that company or stock are very, very attractive. Second could be that the promoters may say that in the next few quarters they are likely to grow their company at a faster growth rate, maybe because they’re doing capex or maybe seeing some demand picking up. There could be various reasons from an earnings perspective and earnings visibility perspective. Third could be that there might be some restructuring going on within the company, where one subsidiary might be taking stakes in another subsidiary. Fourth could be that sometimes promoters also buy stakes in their own company to support the falling stock prices. There could be various reasons why the stock is falling, therefore they might be giving that support by becoming the buyer in the market and taking care of the extra pressure that the stock might be facing in the market. Generally, when promoters are buying, it is considered a good signal from an investor’s perspective. In this video, I’m going to speak about four to five companies where I’ve seen the promoters buying recently, very, very recently, while the market is correcting and crashing, whichever is the terminology you want to use, and these will be good insights for you. These are not buy or sell recommendations. It will hopefully give you quite a good knowledge and quite a good insight about what’s happening in the market. Before I start, a big shout out to the partners of this video, Odoo. Odoo is an all-in-one business management software that offers forty-five plus apps for entrepreneurs such as invoicing, accounting, project management, inventory management, e-commerce store, and much more. The beauty is that all these applications are brought together in one single platform and communicate with each other seamlessly. One such app that you can get absolutely free for lifetime is CRM. Within the CRM app, you can track customer opportunities in the form of cards within the kanban view. In this kanban view, all the key information such as priority levels, expected revenues, etc., is shown on the card itself so that you can track everything in there. You can drag and drop these cards at different stages of the pipeline as you progress with the opportunities. Within each opportunity, you can plan activities like calls, meetings, mailings, etc. You can send emails and log notes within there so that everything is centralized, ensuring simple and efficient management. Once you have a deal logged in, you can create beautiful quotations for your customers in just a few clicks, saving you time and effort. The best part, your first app is free for lifetime for unlimited users. Check out Odoo CRM today; the link is in the description and in the pinned comments.
Company 1: Bajaj Finance
Let’s start with the first company, and the first company is Bajaj Finance. What you see on my screen is insider trading of Bajaj Finance, and what you note very quickly is that Bajaj Life Insurance Company has acquired some quantities when the war was going on. But please note that these are not stocks; these are debentures. This is why I’m explaining to you, whenever you are reading some insider trades, you need to go into the nth level of detailing to see what has actually been bought by the promoters, so this we shouldn’t really consider. But if you go back, their promoters, Sanjali Bajaj and Siddhant Bajaj, have got huge quantities that they’ve bought from the market. As you can read here, these are market purchases. You can see both the lines and they’ve got like nine lakhs of quantities, so good quantities is what they have bought. You can in fact see the price at which they have got these stakes. Also, you can go and have a look at what is the current price. Now, what you may find is that the current price is lower than what these promoters bought the stakes at. And this is an important point for you to understand, that just because the promoters have bought the company’s stakes, it doesn’t mean that is a good price. The stock price could be anything; it could even fall further. But generally, promoters wouldn’t buy a company’s stakes back at a price that is very, very high from a valuations perspective. Let me just speak about valuations in that case in a minute. What you see is the price-to-book ratio of Bajaj Finance for the last ten years. Quick insights here: the median has been around 8.1, and the current has been around 5. Price to book is 5. The lowest it has been is at around 4.7, so it’s not that it is lowest right now, but it is getting very, very close to the lowest. Again, if the stock continues to fall further, then it is entirely possible that the price to book might go down further. But if you look at the last ten years, you can clearly see where the median has been, where the current valuations are, and what the chances are in terms of it going further down or not. For example, these levels when the stock was trading at around 13, you see these were the crazy valuations. Would you call this current valuation a crazy valuation? Absolutely not. But it doesn’t mean it cannot fall further, so I’m giving you a both-side picture so that you get unbiased commentary and analysis in terms of how to look at these valuation metrics. You can’t just look at one point that we are just comparing with the median; we look at the lowest, we look at the median, we look at the highest, and we look at what might be causing this as well.
I’m going to talk about that in a minute. Before that, have a look at their quarterly numbers. Their net profit was 4,066 crores. Now, one could argue that this is a sharp decline from their previous quarter, which was 4,948 crores. Yes, absolutely. In fact, on a year-on-year basis if you go back, there is a sharp decline from 4,308 versus 4,066 crores. Now, when we look at these headline numbers, we think that the earnings are dropping and maybe this is a bad company, that’s why valuations have shrunk. We need to go further deep down into details. I looked at their Q3 numbers and their commentary, and what you note is that the company made a huge provision in Q3 of FY26, which is around 1,406 crores. Now, why did this company make the provision? The management said that we are seeing some risks in our business, we want to strengthen our balance sheet, and we want to make sure that we are ready for the future, that’s why we are doing more and more provisions. And they said that it is likely that we may make more provisions in the next few quarters. Is this a good thing or a bad thing? If you read finance stocks, then you would say that making provisions is not a bad thing at all. It means the promoters and the management are being very, very prudent, and they are making some provisions for future problems so that if at all the problems come through, their business is resilient, that’s why they’re making provisions. Also, they had the labor code impact that almost every company has had in the past quarter or so, and that was 265 crores. So if you read the pre-provision and look at this impact, the numbers were good; profit after tax grew actually by 23% on a year-on-year basis, but because of these two reasons, you see their profit after tax dropped by 6%. Now, this is at least the level of detailing you need to go through to ensure that you understand why the profits fell, because everything is baked into valuations from a profit perspective as well. Now comes another point. If you look at their operational matrix, for example, the AUM growth rate, again, I’m just going to quickly show you the data. What you see is that the entire loan products that they have, be it urban B2 loans or gold loans, etc., you see the growth rate except one, which is the captive two-wheeler and three-wheeler finance that dropped by 57%. But that’s a very small business, only 3.2%. If you look at all other segments, there is a very, very healthy growth rate from 20% to 27%, 26%. In fact, the highest business, which is the mortgages, 30.7% of revenue comes from that or the AUM is 30.7%, it has grown at around 25%. So operationally, if you look at the metrics, I don’t see any big problems from an operational perspective. Now, also a very, very interesting point: when I was reading their call records for the last quarter, I found that if you look at what the company is doing, they are relying heavily on AI. Again, you can read all this commentary, pause the video and read it. But let me just pick up one thing: they listened to 20 million calls of the customers using AI and converted those calls into text. And by doing that, they ultimately looked at around 5.2 lakh customers. And because they looked at and listened to those calls from a text perspective, they created almost 100,000 new offers for their customers. So this is a practical use case of AI. You keep asking where AI is used; this is a practical use case of AI where they’re able to quickly understand, listen to their customers, and create new offers on the back of what the customer calls were about. There’s a huge investment the company is doing in AI because they are doing a lot of efficiency management within the business. Again, go and read all of this detail; I’m not going to read it all to you, but hope you understand it.
Now comes the risk part. All of these are positive signs, and what are the risks, Rahul? One of the biggest risks right now is that ongoing war. Any stock you touch, it’s falling. That’s just the nature of the market right now. When I’m recording this video, that’s the nature of the market right now. So could the stock fall further? Absolutely. So that is a risk. And more importantly, the biggest pressure right now that banks and NBFCs face is the tightening of liquidity, tightening of rising credit costs—all of these factors. Inflation might go up, and that might cause a lot of pressure for banks and NBFCs, which is a huge risk right now. I would say start reading about this company, go and look at their annual report, you will understand a lot about what’s happening in the company and maybe, depending on how you see the company in terms of your analysis, you take your own decision. It’s not a buy or sell recommendation, but hope you got a lot of insights from this small commentary I’ve given you. I have only given key points; I haven’t done a deep-dive analysis as I want to give you a bit more quick commentaries about a few other companies. If you like that, I request you to hit the like button, let me know in the comments with a simple thank you, and also subscribe to my channel so that you can get all these timely updates.
Company 2: HCL Technologies
With that, let’s go to company number two. Now, the second company is HCL Technologies. Yes, you heard it right: HCL Technologies from the IT sector. Right now you might say that, Rahul, the IT sector we don’t like, or you might say that, Rahul, you know what, the IT sector is at very, very good valuations. You might be in either of the camps. If you have not watched my podcast where Mr. Sunil Subramaniam very, very beautifully put it out that right now he thinks that it is a value play, it’s not a growth play, go and watch that sort of segment there. There’s an IT segment in that podcast; if you don’t have time to watch the full podcast, go and at least watch that IT segment. But coming back to HCL Technologies, a few very, very important and key insights for you. If you see, Vamasundari Investments, that is the promoter group, they have bought some good quantities—84,000 here, almost two lakh stocks here. You can see the price at which they have bought it. Again, as I said, it doesn’t mean that this is a good price or this is a bad price; the stock price could be anything, that’s not the consideration here. But the point to note is that promoters have bought the stakes in the company when a war is going on and the sentiments about it are at the rock bottom.
Here are these important insights about this company so that you understand at least some level of degree in terms of what’s happening. Number one, the first thing in IT companies, what do we do? We look at the deal pipeline. An important point I’ve been saying this at least for the last two-three years, that whenever you are analyzing IT companies, look at the deal pipeline. Here are some reported or estimated numbers about HCL Technologies’ total contract value (TCV). What do you notice? The trend is very, very good. In fact, Q3 FY26 has seen the multi-quarter high in terms of the deal pipeline. Q3 is what represents 3 billion dollars of net new bookings that came in Q3 FY26. And in fact, I was reading their call summary, that number of 3 billion dollars represents 17% quarter-on-quarter growth and 43% year-on-year growth. This is a huge number in terms of the deal pipeline. But here is a red flag for you, because I really want to be totally unbiased with you. What is that red flag? If that is the huge growth rate in their deal pipeline, why is their growth guidance only 4.75% to 5.25%? This I don’t understand, that companies are reporting good deal pipelines but that’s not materializing into their revenue guidance, and I don’t understand why. In fact, when I was reading their call, investors were asking exactly the same question. Anyways, I’ll leave you to read all of this commentary in terms of how their business is doing. But one key important point that I want to talk about is their AI contribution to the overall revenues. So if you look at AI here, for example, have a look at the fact that their AI initiatives have reported around 19.9% growth in their advanced AI services.
So they seem to be doing good there. In fact, if you look at one of the large deals they did around AI, it is a 5-year deal with a TCV of around 473 million dollars. Also, if you compare HCL, Infosys, and TCS, ChartGPT tells me that in terms of the AI share of their pipeline, HCL Tech has the highest among the three large-cap companies. It is around 25 to 30%, the highest, followed by Infosys at 20 to 30%, followed by TCS. But of course, you understand TCS’s base number is very, very high; revenue-wise, they’re a much larger base, so you can just understand that point here as well. Also, another important point about HCL Tech is that if you go and read their latest happenings about what the company is doing, they have acquired almost four to five companies in the last two to three quarters. The names are Fergic Solutions, PD Limited, a Belgium-based AI startup company Wobby BBB that you can read here, HPE Telco, and another one, Jaspersoft, for 4 to 40 million dollars. So a lot of cash has been used to buy these inorganic opportunities. These might be good things or bad things, I don’t know, but at least you understand they are investing a lot of money into buying companies like AI startups, etc., because they might not have inherent capabilities, because IT companies have not done a great job. All of us know that right now. Coming to what their management is saying, it is that they are on track to be the fastest-growing large-cap services company for the fourth year running.
And that’s why, if you look at the valuations of this company as compared to TCS and Infosys, what you would find is that they’re still trading at a premium than TCS and Infosys. You can read the P/E ratio here: 20.74 versus 17.23 for Infosys and 16.74 for TCS. Again, the question you need to ask yourself is slightly bigger: does it have a space in your portfolio as of now? Secondly, are you a value type of investor or a growth type of investor, and what else is going on in IT that might cause some more falls? You need to look at the risk; you need to also look at the downside protection for your portfolio. I’ve remained totally unbiased, given you both negatives and positives, and if you like that, I request you to like the video.
Company 3: Jindal Stainless Limited
Let me go to stock number three. Now, the third company is Jindal Stainless Limited, my first employer back in the day. Have a look at the insider trading data here, and what you notice is that JSL Overseas Holding Limited has bought around 269,000 quantity of this company. You can see the average price as well. And it’s not just on one day; they got it continuously over multiple days in a row—they’ve been continuously buying. I mean, I don’t know what is going on here; they are doing a lot of buying internally. Right now this sounds very, very positive. But read this: when the war was going on, the company came out with a statement about the impact of the war on the company’s operations. And what they’ve said is that due to the heavy dependence of stainless steel manufacturing on industrial gases such as propane, LPG, and natural gas, several processes across our plants have been adversely impacted. Again, you can read the entire detail, but what they’re trying to tell you is that because of the disruption in LPG, propane, and natural gas, or whatever, that might potentially cause problems for our operations. Because please understand, if these supplies stop, then it might come to a point where the production might need to be halted. I’m not saying it will get halted; I’m saying it might, and that’s why I’m calling it out as a risk. The company is admitting that as a risk, but this statement came out and the promoters were buying just days later.
So there seems to be a slight conflict, or rather I would say one is a green flag and another one is a red flag. Again, I’m trying to be very, very unbiased with you, giving you both insights so that you understand what is really going on. But if I talk about this company’s other key insights, if you look at their con call summary of the last quarter, what you note more importantly is that their domestic demand across all these sectors—be it automotive, be it pipes and tubes, white goods, railways, metro projects—everywhere they are seeing good demand growth rate coming for steel and stainless steel. So overall, the momentum is there with the company. Whether this momentum can really continue because of the war situation, we don’t know; we’re going to see that. And that’s why the risk is kicking in now. If you look at the valuations of the company as of now, let me show you the valuations. If you look at the valuation right now, the P/E ratio of the company is around 19, industry P/E is around 19. The P/B ratio is 3.24, which is on the higher side versus the industry P/B of 1.48.
The PEG ratio is negative. Why is the PEG ratio negative here? If you go back and have a look at the profit and loss of the company, you would note that their net profit was 2,500 crores, but previously it was 2,693 crores. So there has been some degrowth in their PAT, and hence the earnings per share might have gone down, and hence the PEG ratio is showing negatively because it’s looking at the last 12 months versus the previous 12 months. So you understand this point as well. Again, I’m not going to go into a lot of detail about this company. It’s a cyclical company; we all know the metal industry is cyclical. A lot depends on what is happening in the international market in terms of commodity prices, demand, and supply. But I’ve given you key points; please go and read about this company and look at your own analysis as well.
Company 4: Kalyan Jewelers
With that, let’s move to stock number four. Now guys, a lot of analysis and effort goes into bringing such videos to you. And if you’re liking it, I request you to become a subscriber of my channel. And also, if you want to get premium content, then you can consider joining my YouTube community. Almost on a daily basis, I’m trying to give some insights so that it is helpful for my viewers. It’s not a buy or sell recommendation, but I try and give you analysis so that you can make your own decisions. The feedback of the community has been good. Simply go to my channel and click on the join button and follow through the process. Also, a second important point: if you’re writing the names of these stocks in the comment section, please don’t do it, because a lot of people will not watch and have no context of what I have been talking about in this particular video. And if they go and blindly invest, then you know what, at some level you are at fault. Please don’t do it. If somebody’s interested to learn, let them watch the video. You’re not going to save anybody’s time; it’s not called saving somebody’s time, it’s actually doing the reverse of that. So please don’t do that, humble request. With that, let’s come to the fourth company, which is Kalyan Jewelers. Now, interestingly, they haven’t bought during the war situation, and I’ll come to that in a minute because the war has a huge impact on Kalyan Jewelers. But in the month of February, if you see, T.S. Kalyanaraman, they have done around four batches of buying. You can see the quantities; a good number of quantities they have bought. And if you look at the price also, you can see the price here, at what price the promoters got the stakes back.
Now, if I talk about the company’s valuations, let me go to valuations. Last ten years’ P/E ratio of this company shows huge swings. The median has been around 47.7. Right now it is at around 33.3. The highest valuations, it was a crazy valuation, a P/E of 127.9. Crazy valuations. Now at least we have learned that picking a stock at huge valuations like 120, I don’t know, even 80 or 60, it’s a crazy mistake—I mean, that’s like a red flag immediately. But coming back to the lowest valuations that were prior, somewhere around, the lowest has been around, let’s say, 18.8 back in the day. Currently, it is at 33. Could this go down to 18? Entirely possible. You have to think through that scenario: what happens if the valuations, the current valuations which are at around 33, drop to 18? Are you ready for that? That’s the question you need to ask before you think about upsides, etc., so that you understand both pictures. That’s the entire intent here. Now, if I come and talk about this company’s few key insights, one thing is that I was reading their con call summary, and what the management said is that the Middle East was showing a very, very strong quarter. Remember, this commentary came out before the war broke out. This was for the quarter that just passed. Now see what has happened in the Middle East when the war started. An important point for you to understand is that they have around 38 showrooms in the Middle East. I don’t know the exact locations; I tried to find it out, I couldn’t get it in their annual report as well, but you can go and find out where exactly these are located. More importantly, I was reading their annual report to get some data and I found that in the Middle East, around 32,032, which is in million rupees, that’s the top line. And if you translate that, it comes out to be around 12%. So 12% of their top line came from the Middle East.
Now we know what’s happening in the Middle East, so of course there is pressure on the company in terms of their top line, not only from the Middle East; the war has also created a lot of other problems or uncertainties. Rather, what are the other uncertainties? For example, Dubai. Dubai is considered the hub for gold; that’s where the gold moves to countries like Switzerland, to countries like India, to countries like European countries. So we don’t know what’s happening to that, whether this is positive or negative we don’t know, because that’s the impact. Another big macro point is the inflation rate fears in the US, and therefore people pulling out money from gold and putting it in dollar-denominated bonds, for example. What impact that could have on Kalyan Jewelers, we don’t understand that fully, even management might not understand. So the point is that there is a heightened risk right now, but the valuations accordingly have come down, so it’s like both things are happening.
You never get a business at a cheap valuation when everything is honky-dory; that’s the point I’m trying to tell you here, that these are the points that you need to consider. Any other points that I give you, if I just give you another point about this company, it is to look at their profit and loss statement and look at how quarterly, if you see, how the revenues have been growing up. If I show you the yearly view, see from previous years onwards how the business has picked up from a PAT perspective: 224 crores, 432 crores, 596 crores, 714 crores, 1,128 crores. Can they sustain this momentum given the fact that now there is uncertainty? At the time, the valuations were around 127 P/E; now the valuations are not like that. I would highly say that add it to your watchlist, watch it for a few days or weeks, and see what’s happening with this company in terms of the valuations. Because when the valuations drop to, I don’t know, 18 or 20, then you might do an assessment of what the opportunity is in this company, if there is any opportunity. It’s not a buy recommendation right now, it’s not a sell recommendation right now, it’s not a recommendation at all. My point is to give you insights, and that’s what I’ve been trying to do. I’ve been very, very unbiased, and if you’re learning from these insights, if you’re getting some good learnings from an equity investing perspective, try and spread the joy—share this video with your friends and colleagues, let them also learn, and let me know in the comments what you felt about the four companies that I’ve talked about.
