Did they know something that we didn't? In hindsight, it sure looks like that. First, the statistics: between April and June this year, promoters increased their stake by more than 1 per cent in some 120 companies.

Not too long ago, everyone, including regulators, would have smelt a rat when a promoter upped stake in his company. The advent of liberal stock buy-back and creeping-acquisition laws has changed that.

After all, a buy-back is sign that a promoter believes in his company. For the record, many scrips were trading near their all-time lows in the April-June quarter. Expectedly, only some 60-odd promoters reduced stakes in their companies, mainly through fresh issue of shares to investors or partners.

Analysts dismiss the phenomenon as a natural fallout of the economic recovery. "The outlook for business is positive," says Navin Agarwal, Director, Motilal Oswal Securities, a Mumbai-based brokerage. "It's natural that promoters increase their stake," he adds.

Still, promoters must be given their due for backing their hunch that 2003-04 would be a better year for the Indian economy. Now that the monsoon has arrived and performed beyond expectations, and consumer demand picked up, entities such as the Central Statistical Organisation and the Reserve Bank of India are revising their growth estimates to predict a 6 per cent-plus growth in GDP this year. Three months back, no one was willing to do this.

The valuations helped. "Share prices were very low (in this period) and promoters obviously took advantage of this," says Kai Taraporevala, Managing Director of India Advisory Partners, a firm that tracks M&A activity. Such promoters must be celebrating now: The Bombay Stock Exchange's Sensex has risen over 50 per cent since April-end, and both it and NSE's Nifty were trading at their 30-month highs when this magazine went to press on September 8. "Valuations were so attractive that it was absolutely necessary for promoters to increase stakes," says an analyst who believes that there are still several stocks that "look attractive".

Promoters increase their stakes through creeping acquisitions, open offers, or stock buy-backs. The Tata Group seems to have mastered the art of the first, especially in companies in which it has a sub-26 per cent stake. For instance, it increased its stake in Voltas from 25.69 per cent to 28.34 per cent between April and June 2003. In the same period, it also increased its stake in VSNL by around 1 per cent. And over the past three years, it has increased its holding in Tata Steel by more than 5 per cent.

This may have been a case of the promoter with very low holding in a company upping its stake. It could have also been a reflection of the Tata Group's long-term bet on the steel sector. Investors would do well to keep an eye on promoter-holdings, then.

For instance, over the past five months, the promoters of Vardhaman Spinning and Mahavir Spinning have increased their stake; around the same time, the textile sector has seen a turnaround.

The most serendipitous case of an increase in promoter stake has to be that of Apollo Tyres. Between April and June this year, CEO Onkar S. Kanwar and his associates acquired a 4.95 stake in the company through the creeping acquisition route. These shares were part of the 15.1 per cent stake in the company held by the late Harshad Mehta. Apollo Tyres acquired the remainder and, in keeping with the law, extinguished them. Net result: the equity base of the company came down, and the 4.95 per cent acquired by Kanwar and his associates became 9.66 per cent.

Sometimes, promoters have so much faith in their businesses, or are upset at low valuations, or both, that they want it all.

This is especially true, as Sangeeta Purushottam, Head (Equities), ask Raymond James, puts it, of ''foreign companies that want to become private''. For instance, Catterpillar Commercial, which increased its stake in Hindustan Powerplus from 37.74 per cent to 91.99 per cent, will now make an open offer for the remaining 8.01 per cent, as a precursor to delisting the company. That may not be good news for investors, but it's still a sign of ultimate faith.

-Sahad P.V.

AI
A Four-Foot Magnesium Thingie

Honda founder Soichiro Honda had a dream of a bipedal robot. now, you may take walking for granted, but evolutionary biologists consider it the greatest achievement of the human race. Consequently, since 1986, Honda scientists have spent millions of dollars and thousands of man-hours to get a robot to do the same. The result was showcased in India recently, some three years after the Advanced Step In Mobility (ASIMO) robots-probably a play on the sci-fi writer who enumerated the three laws of robotics, Isaac ASIMOV-made its debut. One of the 50 ASIMOs to have been built thus far, this one even managed a jig to the music of a Bollywood soundtrack. Contrary to what the slug suggests, ASIMO boasts no artificial intelligence and its battery can survive a mere 30 minutes. Nope, it won't build the matrix.

-Kushan Mitra

Volatile Gas
Just why do fuel prices go up every 14 days?

Smart answer to stupid question: because, that's how often officials from Indian Oil Corporation, Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited, and IBP sit down with representatives from the Ministry of Petroleum to finalise the price of petrol and diesel. Or should we say fix?

On the face of it, the recent price hike can be attributed to a hardening in global oil prices (Brent crude was being traded at $31 a barrel on September 1, close to its Iraq-war-days-high of $34). Ever since the oil sector was partially deregulated on April 1, 2002, goes the argument, domestic prices have moved in tandem with international prices.

All well, only, the deregulation hasn't achieved its objective of fostering competition. Today, each of these companies, irrespective of its cost of operations charges the same. And no one is clear on the formula used to determine the prices.

Import-parity pricing has worked wonders for the profitability of the oil companies. IOC's profit after tax increased by 112 per cent in 2002-03; BPCL's by 95.2 per cent. "Obviously, oil companies haven't been passing on the benefits of import-parity to the common man," says a senior official of the petroleum ministry. Competition-some eight distribution companies will start operations in 2004-could change that, reckons M.S. Ramachandran, the Chairman of IOC. Already, Essar, one of the eight, sells diesel for 80 paise less than the state-owned companies at its outlets in Gujarat. Meanwhile, the price hikes continue to take their toll. Economist B.B. Bhattacharya estimates that a 10 per cent increase in fuel prices leads to a 1 per cent jump in inflation, and a similar increase in price of industrial goods. Oops!

-Ashish Gupta

To Eye Or Not To
2i's Vivek Sekhar is a born-again VC willing to play angel.

Sweat Equity?: No, 2i's Sekhar is just a propnent of doing it yourself

Differentiation is so much a commodity these days that it seems a cliché to term Vivek Sekhar, a venture capitalist (VC) with a difference. Still, that is what he is. In mid-2000, Sekhar, a long-time finance pro-he cut his teeth managing Grindlays' India Investment Fund in the early 1990s-launched 2i Capital. Advised by the likes of Bala Manian, a man fast gaining a name as the Vinod Khosla of the biotech world, 2i is in the process of raising Rs 500 crore (over time) from Indian investors for a venture fund. In India's blow-hot, blow-cold venture capital milieu, that's radical.

Sekhar has the rule book on his side: Investment in VC funds registered with SEBI (Securities and Exchange Board of India, India's stockmarket regulator) was dubbed 'priority sector investment' in November 2002; and India's central bank insists that banks forward at least 40 per cent of their advances to priority sectors.

Then, there's logic. "Why should people overseas invest in us, if they don't see a commitment from this country?" argues Sekhar, adding that it is common practice all over the world for banks and insurance companies to invest part of their portfolio in venture funds in the hope that abnormal returns from these boost their overall returns a bit.

2i is also raising between $100 million (Rs 460 crore) and $150 million (Rs 689 crore) from overseas investors for another venture fund. Where's all that money going to go? "We already have deal flows worth Rs 300 crore," says Sekhar. All of 2i's funds will invest around 35 per cent of their money in early-stage investments (now, that's true venture capital!) For instance, 2i is working with a Mumbai-based surgeon who has come up with what could well be a minimally invasive alternative to angioplasty.

This VC is willing to tread beyond it services and business process outsourcing. That's different.

-Vidya Viswanathan

INHOUSE
Captive Customers

Not too long ago, the only gift shareholders received from companies was a box of sweets during Diwali or the annual general meeting (AGM). The shareholders of a certain biscuit company still look forward to the AGMs where they're given an assortment of foreign-made cookies, packed in hand woven cane baskets. Circa 2003, however, shareholder sops are getting real. Reliance Infocomm announced a special package for the 3.3 million shareholders of its parent, Reliance Industries. Free talk-time and other benefits make the scheme nearly Rs 1,500 cheaper for the shareholders as compared to regular customers. Even if 10 per cent of the company's shareholders sign up, it makes for big numbers.

Reliance's rival and the other Indian business house with a shareholder base in excess of 2 million, the Tata Group is working on bettering the Reliance offer. And at its last AGM, Tata Motors announced discounts for shareholders interested in the newly-launched Indigo. Nifty little idea, this.

-T.R. Vivek