Promoter holding is seen as a barometer of business prospects. Higher promoter holding typically signals that the promoters are bullish about a company. In contrast, a decline in promoter holding is mainly seen as a negative. However, corporate actions like rights issues, mergers, and promoter reclassification can also impact promoter holdings. This makes it crucial to understand the reason behind the change in promoter holding.
Nonetheless, promoter holdings are often seen as a leading indicator of potential shifts. As such, we have selected two stocks in which promoter holdings have declined by over 7 percentage points.
#1 Wonderla Parks and Resorts
Founded in 2002, Wonderla is a South-based company that operates amusement parks and resorts. It is one of the largest amusement park operators in India and has a very strong brand recall.
In 2005, the company launched its first amusement park in Bangalore. As of September 2024, the company operates four parks (Kochi, Hyderabad, Bangalore and Bhubaneswar). An ongoing Chennai project estimated to cost around ₹5.2 billion is expected to be completed by Q3FY26.
The promoter stake in Wonderla declined by 7.5 percentage points to 62.3% in Q3FY25 from 69.8% in Q2FY24. The company raised Rs 5.4 billion through a qualified institutional placement in December 2024, which has reduced shareholding.
The company’s revenue rose 13% from last year to ₹4.83 billion in FY24, driven by a 15% growth in average revenue per user (ARPU) to ₹1,430. However, net profit increased only 6% to ₹1.58 billion, as margins fell 3 percentage points to 49%. Nonetheless, Wonderla maintains an industry-leading margin of 45-50%.
However, the company reported a weak performance in 9MFY25. Its revenue fell 6% from last year to ₹3.6 billion due to 7% lower footfall and a slower 1% growth in ARPU. Its margin fell 14.7 percentage points to 37.5% due to increased fixed costs. As a result,net profit declined 27% to ₹0.98 billion, dragged by lower margins.
Looking ahead, the company raised ₹5.4 billion to fund its expansion plans. The funds will mainly be used to develop a new park in Chennai and upgrade its existing park. The Chennai park will likely start contributing from December 2025 or January 2026, with initial footfall estimated at 0.7-0.8 million.
In addition, it is also building a park in Odisha and is exploring opportunities in other locations to diversify its geographical concentration. The company is also working on increasing revenues by offering value-added services on entry tickets. It also focuses on leveraging digital platforms and enhancing its social media presence to attract customers.
However, note that the amusement park industry is highly cyclical with volatile cash flows. The first and third quarters are seasonally strong, while others are lacklustre. However, fixed costs must be paid throughout the year, impacting performance occasionally.
Wonderla trades at a price-to-equity multiple of 33.6x, in line with its 10-year median of 32.6x. Its stock price has fallen by over 30% over the last one year, bringing down its valuation.
Wonderla Share Price
#2 Awfis Space Solutions
Awfis is a flexible workplace solutions company incorporated in 2014. It is India’s largest flexible workplace operator in terms of the number of centres. The company has over 1.1 lakh operational seats. Its presence is well-diversified across 181 centres, 17 cities, and 53 micro-markets.
The company has a diversified customer base of 2,459 tenants (as of FY24), which reduces tenancy risk. The top five customers contribute 13.8% to total revenue, reducing tenant concentration risk.
The tenant mix is diverse. 48% of tenants are from the information technology industry, of which around 68% are large corporate multinational companies and 11% are start-ups.
The Promoter stake in Awfis declined by 7.8 percentage points to 20.4% in Q3FY25 from 28.2% in Q2FY25, primarily due to sales by key investors, Peak XV Partners and Bisq Limited.
Awfis has two unique business models: a straight-line lease model and a managed aggregation model. Under the straight-line lease model, it leases space from developers in lieu of a fixed monthly rental, with all capex borne by Awfis.
On the other hand, in the managed aggregation model, Awfis forms partnerships with developers and space owners, who become shareholders by co-investing. In this mode, partners bear 50-90% of the capital cost, with Awfis funds the rest. 67% of Awfis’ total seats operate under this model.
With lower Capex, the managed model generates a higher return on capital employed (RoCE) of 78%, compared to 33% in the straight lease model. The payback period is also lower, at 16 months, compared to 36 months in the straight lease model.
However, margins at 22% in the managed model are lower than 32% in the straight lease. This is because, unlike in the lease model, where it retains full earnings after fixed costs, Awfis shares revenue with property owners in the managed motel, which lowers its margin.
Talking about its financials, the company’s revenue surged 56% from last year to ₹8.5 billion in FY24. However, it remains a loss-making company, with a net loss of 0.18 billion, down from a 0.47 billion loss in FY23. At the earnings before interest, tax, depreciation, and amortisation (EBITDA) level, Awfis remains profitable, with ₹2.7 billion EBITDA in FY24, and a margin of 31%.
In 9MFY25, revenue growth continued with 41% growth from last year to ₹8.7 billion. The company turned profitable, with a net profit of ₹0.57 billion. Its EBITDA rose strongly by 61% to ₹2.9 billion, with a 33% margin driven by occupancy improvement, enterprise clients, and operational efficiency.
Looking ahead, Awfis aims to expand in key micro markets in Tier I and Tier II cities with high demand and strong long-term returns. The company focuses on growing its portfolio through an asset-light managed aggregator model.
At a P/E of 139x, valuations appear premium. However, given its recent listing and lack of comparable peers, it’s difficult to assess its valuation range.
Awfis Share Price
Conclusion
In both cases, the decline in promoter holding was driven by strategic decisions rather than any indication of weakening business confidence.
Wonderla diluted its stake through a QIP to fund expansion, while Awfis saw exits from early investors. These changes improved liquidity and broadened institutional participation. Investors should look beyond promoter activity in isolation and evaluate business performance, financial health, and long-term growth visibility before forming a view.
Disclaimer
Note: We have relied on data from throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. With a knack for simplifying complex concepts, he enjoys sharing his honest perspectives on startups, listed Indian companies, and macroeconomic trends.
A dedicated reader and storyteller, Madhvendra thrives on uncovering insights that inspire his audience to deepen their understanding of the financial world.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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