Promoter stake sales through block deals are significant events in the stock market, often influencing investor sentiment and stock prices. Let’s delve into what block deals entail, examine recent instances involving Easy Trip Planners, and understand their implications.
What are block deals?
A block deal is a high-volume transaction of shares, typically over 5 lakh shares or a minimum value of ₹5 crore, executed through a separate trading window. These deals are pre-negotiated between parties and conducted during a specific time frame to minimize market impact. They are often used by promoters, institutional investors, or large stakeholders to discreetly buy or sell substantial quantities of shares.
Case Study: Easy Trip Planners
Easy Trip Planners, operating as Ease-My-Trip, recently witnessed significant promoter sales.
Promoter Stake Sale: Nishant Pitti, co-founder and promoter, sold his entire stake of 14.21% last week. He also resigned as the CEO and CFO of the company. Now, his brother has been elevated to the CEO position.
The markaet has taken this negatively, and stocks reacted negatively to this news. The deal happened via block deals.
Analyzing the Global travel industry.
The global travel industry growing around 26% CAGR. Where the online travel market also bouncing back.
Business model: Its founded in 2008, and is its 2nd online travel platform in India. Offers end-to-end holiday destination services. It does not impose any type of convenience fees.
It works on an EMT business model. This means Experience Management Technology, acts as an intermediary between air lines, hotels, and their customers.
India’s fastest-growing and most profitable online travel agency (OTA) has seen remarkable success, growing at a 47% rate in gross booking revenues from FY20 to FY23.
It has outpaced competitors like MakeMyTrip & Yatra.
Industry outlook
Strong growth across several areas: Air travel grew by 62%, hotel bookings by 121%, and other segments by 10%. This resulted in a 42.6% year-on-year increase in Gross Booking Revenue, reaching ₹23,710 million. By June 30, 2023, the company had served 14 million customers.
The Hotel and Holiday Packages segment has seen impressive growth, with a 178% increase compared to the previous year, reaching a gross booking revenue of INR 241 crores.
Increase in Profit After Tax attributed to increased employee and marketing expenses due to recent acquisitions and initiatives. Management remains optimistic about the future.
Conclusion
When promoters (the company founders or main shareholders) sell a large part of their stake, it can worry investors. It often suggests that they might not be as confident about the company’s future. A big drop in their ownership can raise concerns about the company’s stability and how it’s being managed. It could also mean that there are internal issues or the promoters are not as excited about the company’s growth potential. So, investors need to be cautious when they see this happening.
Promoter stake sales through block deals can impact the stock price in the short term, but they don’t always mean bad news for the company. Investors should do their research, looking at the reasons behind the sale and the company’s overall health, before deciding whether to invest. It’s important to consider the bigger picture and not just the sale itself.
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