India Infrastructure, Power and Industrials Floating Gems:: JPMorgan

In this report, we analyze four aspects of stock ownership i.e., free float,
institutional holdings, insider transactions and promoter share pledge.
Together, these are good indicators of share performance, in
conjunction with fundamentals of course

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 FII interest picks up meaningfully in the power sector: Over the
previous quarter, FII stake in average free float has increased 600bps.
DIIs have been sellers through the year, but in the Mar-q DII holdings
increased ~70bps qoq. Flows improved in our preferred picks i.e.,
NTPC and PWGR as wells as IPPs like JPVL (driven by the QIP) and
JSW Energy (low leverage, steady cash flow IPP). In Industrials, there
has been a ~50-100bps decline in institutional holdings, while flows had
divergent trends in the infra/conglomerate space (up for FIIs, down for
DIIs).
 Insider transactions: In the Mar-q, we saw promoter stake increase in
Adani Power (168bps to 70%) and Tata Steel increased its stake in
Tata Power (promoter holding up 72bps to 32.5%) to meet
requirements regarding its captive power procurement. Promoters were
sellers in the case of ADE and NTPC to meet listing norms; while JPA
and JPVL raised equity via QIPs, thus diluting promoter holding.
LANCI continued to see sell transactions by promoters in the Mar-q
(holding down 5bps qoq to 70.8%) – a consistent trend for the past five
quarters (holding down 153bps).
 Complying with SEBI norms on minimum free float: Before the Jun-
13 SEBI deadline Adani Ports, Adani Enterprises, Essar Ports and
JSW Energy would have to pare down promoter holding to 75%. In the
event of a fresh issue, the size of the offer will be largest (~Rs10B) for
ADSEZ at current market price, while the EPS dilution will be highest
for Essar Ports (~6.6%).
 Promoter pledge ratio: Promoter pledge is the highest for JPVL (68%
- declined ~300bps qoq in the Mar-q), Crompton Greaves (62%
- consistent and large increases over past 3Qs) and Suzlon (100% - has
been >95% since past 4Qs) within our coverage universe. Pledges also
increased for GMR (550bps qoq to 37%) and JSW Energy (varies
directionally every quarter), while declining for the levered IPPs Lanco
Infratech (down sharply from 65.5% to 37%) and Adani Power (down
480bps to 22%).