1 in Every 3 Stocks Owned at Ujjivan SFB and Easy Trip Planners : Retail Investors Rule the Game
Ujjivan: Stocks of Ujjivan Small Finance Bank and Easy Trip Planners have recently experienced a significant decline, giving up 50% of their gains from their all-time highs. Despite this, retail investors have shown unwavering confidence in these companies, consistently increasing their holdings over the past few quarters. As of December 2024, retail investors now hold approximately 34% of these companies.
While reports in the media regarding promoters reducing their stakes led to a sell-off in shares of online travel company EaseMyTrip, Ujjivan Small Finance Bank saw its shares affected by stress in microfinance lending.
Interestingly, retail investors have been increasing their holdings at a time when institutional investors are reducing their exposure. Foreign portfolio investors and domestic institutional investors (DIIs) have both decreased their stake in Ujjivan Small Finance Bank over the last three quarters. However, retail investors and high net-worth individuals collectively own nearly 61% of Ujjivan Small Finance Bank as of December 2024. In contrast, overseas investors hold only 18% of the bank, while domestic institutional investors own less than half a percent of Easy Trip Planners.
Other companies with significant retail holdings include Tata Elxsi (30%), HFCL (29%), Gujarat State Fertilizers & Chemicals (28%), and Ircon International (26%). It is important to note that many companies have yet to disclose their shareholding patterns for the December quarter.
Rating agency ICRA has expressed concerns about the impact of stress in microfinance loans on the asset quality indicators of small finance banks in FY25. The agency believes that the elevated risk of this stress spilling over into other asset classes will keep asset quality volatile in the near future.
Manushree Saggar, Senior Vice President & Sector Head – Financial Sector Ratings at ICRA, stated that profitability for Small Finance Banks (SFBs) is expected to remain under pressure in the second half of FY25. This is due to the fact that these entities will need to provide for or write off delinquent loans in order to maintain reported Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) below the threshold levels required for universal bank license applications.
In other news, the overall retail ownership in Indian equities has surged to nearly 8%, while foreign portfolio investors have reduced their holdings to 17% from the approximately 20% seen three years ago. Additionally, a report from the Securities and Exchange Board of India (SEBI) indicates that households in India have experienced a 57% increase in equity investments as of March 2024 compared to the previous year.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.