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Friday, Nov 29, 2002

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Public pie in IT cos gets bigger

Bharat Kumar

CHENNAI, Nov. 28

IS the Indian public buying shares on bad news hoping to sell when things become better? Or is it left groping in the dark while foreign institutional investors have seen the light at the end of the tunnel?

Either interpretation is possible if changes in the shareholding pattern in IT software companies in the recent past are anything to go by.

Public shareholding has risen in several companies in the sector between the quarter ended September 2001 and that ended September 2002. This is significant given that some of these companies have been through a rough phase, thanks primarily to the slowdown in the IT industry. Meanwhile, the share prices for these companies have fallen.

Industry-watchers say that it is common for shareholders among the public to pick up falling stocks, hold them and sell when prices go up again. However, they add, it is also possible that they bought these in the market from institutional sellers without anticipating bad news. They may now be left holding the stock, they add.

Analysts counter this with the fact that bad news for the industry has been on ever since the middle of 2001 calendar. So, it might well be that public shareholders get into a stock with a reasonable knowledge that the industry is at a low. The assumption for them here is that the industry has seen the bottom - at the time of purchase - and that things can only get better.

SSI Ltd's public holding has risen to 39.3 per cent from 25.68 per cent between September 2001 and September 2002. DSQ's went up to 72.9 per cent from 57.78 per cent. Pentamedia Graphics, for which September 2002 figures are unavailable, saw its public holding rise to 73.86 per cent in June 2002 from 56.88 per cent in September 2001. Pentasoft Technologies' zoomed to 63.12 per cent in September 2002 from 38.22 per cent in June 02.

For a few companies, the change in FII holding has relatively been proportional to the change in share price. SSI saw FII holding come down from 18.64 per cent to 5.52 per cent in September 2002. On the other hand, FII holding in Satyam rose to 42.32 per cent from 35.63 per cent and in Mastek from 12 per cent to 14 per cent. Interestingly, share prices of Mastek and Satyam have both increased while those of SSI, Pentamedia Graphics, DSQ Software and Pentasoft have slumped between January this year and the latest trading day.

It is possible that the numbers of shareholders among the Indian public might have gone down even if the percentage of their shareholding has risen. This could indicate that a few interested parties might have shored up their holdings if they anticipate good news in the market.

However, that has not been the case among the samples of companies whose figures are available. For example, in the case of Pentamedia Graphics, the number of public shareholders rose from 1,60,175 in September 2001 to 1,76,236 in June 2002 to 1,78,229 in September 2002. For SSI, the number rose from 34,157 to 35,094 to 37,671. Pentasoft's numbers increased from 33,583 to 44,924 to 50,987.

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