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Anand Ram

FOREIGNERS find Indian corporate assets just that bit less attractive now than they did a year ago. They own fewer shares and their holdings are also worth less than a year ago.

An analysis of shareholding pattern of the companies that constitute the BSE-100 (National Index) for March 2001 and 2002 reveal that the net foreign holding (shares held by foreign promoters, institutional investors, non residents, OCBs and depositories in the form of ADRs/GDRs) has dropped by two per cent over the last year. The value of these holdings too, has decreased by about Rs 3,052 crore.

However, this pullback does not seem all pervasive. In select stocks, foreign entities have actually increased their stake. Zee Telefilms and HDFC are two companies which have shown a significant rise with 20 and 5.2 per cent respectively, during this period. Foreign ownership in Zee Telefilms now stands at 56.92 per cent while it is 68.7 per cent in HDFC.Others that come close to this technicality of being classified foreign are Satyam Computers (49.86 per cent), ITC (49.55 per cent), ICICI (48.84 per cent), Silverline Technologies (48.67 per cent) and Dr Reddy Laboratories (48 per cent).

In a few cases, foreign shareholding has increased in percentage terms but foreign investors as a class has been left holding lesser number of shares than before. In Siemens, for instance, a share buyback scheme reduced the number of outstanding shares. As foreign shareholders participated in fewer numbers (an understandable outcome with the German promoter accounting for a substantial chunk of such stake) than their local counterparts, their proportion in the total holdings has increased.

Mergers have had an adverse impact on foreign ownership. The merger of Hindustan Lever with International Bestfoods saw the former issuing additional equity shares to the shareholders of International Bestfoods, which resulted in a decreased foreign promoter holding by 0.02 percentage points though the number of shares held by them remained the same as last year. So too was the case with GlaxoSmithKline Pharma where the merger of SmithKline Pharma with Glaxo resulted in the overseas parent's stake going down by 2.17 percentage points.

How far are such stake changes driven by company fundamentals? In companies such as Zee Telefilms and Satyam Computers, foreign holding has increased at a time when earnings per share have declined.

Similarly, in the GE Shipping stock, foreign shareholding has decreased in a year in which earnings per share have increased.

Even from the perspective of market valuation foreign investors have increased their shareholding in companies like Dr Reddy's, where valuations have dropped by 12 per cent over the last one year.

Similarly, they seem to have missed the bus in counters like Sterlite Industries, GE Shipping and TVS Motors where market prices have shot up by 32, 12 and 184 per cent respectively.

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