Mumbai: The frequency and size of block deals in India are keeping pace with the recent surge in India’s equity indices as promoters, private equity majors and global investment funds execute billions of dollars of negotiated trades in public stock. So far in March, shares worth more than ₹55,000 crore – the highest ever in a month – changed hands through block trades on stock exchanges, reflecting the maturing equity culture in a country reliant until recently largely on overseas capital for price support.

In February, block deals worth ₹41,200 crore were executed, while in December 2023, deals worth ₹53,000 crore were transacted.

The smooth execution of such deals dispels long-held concerns about Mumbai’s ability to handle mega stock trades without causing massive disruptions in prices that previously took weeks to heal.

“The Indian capital markets are extremely resilient, driven by strong domestic and international flows,” said Raj Balakrishnan, co-head India Investment Banking, Bank of America.


Significant Appetite
“It is a fundamental ‘buy’ based on conviction around the continuation of the strong economic growth we have witnessed over the past few years,” Balakrishnan said.

Block trades involve share transactions between big-ticket investors such as institutions with large portfolios through a separate window on the stock exchanges. This allows the parties involved to liquidate substantial quantities of shares without disrupting the main market.

To be sure, these trades are pre-negotiated and not open to the public.

The latest trends showed fundraising is not limited solely to large institutional investors as many promoters have seized the opportunity presented by surging Indian equities to cash out.

Last week, British American Tobacco Plc (BAT) divested a 3.5% stake in cigarette major ITC through an open market transaction of Rs 17,485 crore, one of the biggest block deal sales in the Indian capital market history. Tata Sons, the holding company of Tata Consultancy Services (TCS), sold 23.4 million shares in India’s largest software services exporter for at least Rs 9,300 crore on Tuesday.

Bankers said the capacity of major investors – promoters and private equity funds – to execute significant exits further emphasises the appeal of the Indian capital markets.

“There is significant domestic and international institutional money that is looking for opportunities to take large positions in stocks,” said Balakrishnan. “This is exemplified by the fact that a $2.1-billion ITC block could get done in the window with less than a 1% discount.”

Foreign portfolio investors (FPI) bought shares worth Rs 32,000 crore so far in March, while domestic institutional investors (DII) bought about Rs 30,300 crore worth of stock during this period.

Market participants said both FPIs and DIIs are showing considerable interest in transacting deals under this block deal window to avoid the price fluctuations of the traditional secondary market.

“Indian markets remain fairly resilient factoring in both the macro and micro fundamentals,” said Rahul Saraf, head of investment banking, Citi India, which led five block trades in each of the past five weeks, placing equity worth $3.9 billion for sale. “More than 80% of the stock across blocks has been placed with marquee long-only investors, with equal contribution from both global and local funds.”

Hot Cakes
Bankers said many of the recent large deals were executed within a few minutes of the opening of the deal window, giving away little by way of discount to the market price.

On March 7, Singapore Telecommunications (Singtel) sold a 0.8% stake in Bharti Airtel to US investment firm GQG Partners for about Rs 5,884.8 crore. On March 11, Rakesh Gangwal, co-founder of InterGlobe Aviation, sold a 5.8% stake in the budget carrier through the open market for Rs 6,786 crore. Japan’s Sumitomo Wiring Systems sold a 4.4% stake in Samvardhana Motherson International for Rs 3,633 crore through block deals on March 6.

Prudential Management and Services, one of the promoters of Mahindra & Mahindra, sold a 0.75% stake in the company for Rs 1,778 crore through block deals on March 7.

Antfin Singapore Holding, part of Chinese e-commerce giant Alibaba, earlier this month sold a 2% stake in online food delivery firm Zomato for Rs 2,827 crore through open market transactions.

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