OUTLOOK commissioned investment analysts Equicorp Research to figure out the strength of the FIs grip over corporate India.The study has been divided into three parts: all companies (Sample A); companies with sales greater than Rs 500 crore (B); and those with equity higher than Rs 50 crore (C). After filtering out some companies from the three samples for reasons like non-availability of data, state or joint sector control, and institutional holding less than 0.01 per cent, we were left with 941, 101, and 85 companies respectively. Though uniform data was not availablewhile the equity holding of one company could be valid for July 1991, and another for September 1996the findings are indicative enough:
FIs have a larger stake in companies with sales above Rs 500 crore, and equity larger than Rs 50 crore. While average FI holding in Sample A was 13.5 per cent, the figures for B and C are 24.8 and 21.9 per cent respectively. The trend becomes even sharper if you consider institutional holdings higher than 30 per cent: for A, B and C, the figures are 11, 35 and 31 per cent respectively.
Capital is Congenial: Institutional holding is larger in capital-intensive industries or those whose gestation period is longer. For instance, the average FI holding in the seven aluminium and related industries is 22.1 per centand that in the four electricity companies, 43.1 per cent. The figures for less capital-intensive areas like cotton spinning and pharmaceuticals are 13.9 and 11.7 per cent respectively.
The Bottomline: Among scrips of the 25 top companies by FI holdings, four are quoting below par, and 16 below their book value. Clearly, level of FI holding is hardly an indication of corporate quality.