EaseMyTrip promoter offloads 2.6% stake in Rs 176.5 crore deal

EaseMyTrip shares experienced a significant 7% decline following a substantial block deal in which one of the company’s promoters sold 2.6% of their stake, amounting to Rs 176.5 crore. This large-scale transaction led to a ripple effect in the market, sparking curiosity and concern among investors. But is this sharp drop in EaseMyTrip share price something to worry about, or could it present a potential buying opportunity?

In this blog, we’ll explore how EaseMyTrip’s share price reacted to the block deal, the company’s recent stock performance, and what it could mean for investors going forward.

What caused the drop in EaseMyTrip share price?

The decline in EaseMyTrip share price can be attributed to the block deal, which involved the sale of 4.6 crore shares at a floor price of Rs 38 per share—just below the previous closing price of Rs 40.99. The sale, executed by one of the company’s key promoters, saw the market respond with caution, triggering the sharp drop.

The promoter behind this deal, Nishant Pitti, held a 28.13% stake in the company at the end of the June 2024 quarter. Following the block deal, there is speculation that Pitti might further reduce his holdings, with the potential to sell up to 8.5% of his stake, valued at approximately Rs 622 crore. This has naturally led to investor hesitation, as large promoter sales can sometimes signal a lack of confidence in the company’s future.

Block deal details:

How has EaseMyTrip’s stock performed recently?

In the past year, EaseMyTrip share price has been relatively flat, with a 2% decline compared to the 31% growth seen in the Nifty 50 index. The lack of momentum in its stock has been noticeable despite the company making several strategic moves, including diversification into new business areas such as medical tourism and electric vehicle (EV) manufacturing.

In September 2024, the company made headlines by acquiring stakes in the medical tourism sector, with a 30% stake in Rollins International for Rs 60 crore and a 49% stake in Pflege Home Healthcare Center for Rs 30 crore. Additionally, EaseMyTrip has plans to enter the EV manufacturing industry, specifically to produce electric buses, which could be a game-changer in the long term.

Despite these forward-thinking moves, EaseMyTrip’s share price has remained lacklustre. The block deal and promoter stake sale have added another layer of uncertainty, leaving many investors wondering about the stock’s potential future trajectory.

Why do block deals matter?

A block deal, like the one EaseMyTrip saw, can have a significant impact on share price movements. Block deals are typically executed by institutional investors or promoters looking to sell large chunks of shares in a single transaction. While these deals offer liquidity, they can also raise concerns about the stock’s immediate future performance.

In EaseMyTrip’s case, the promoter offloading a 2.6% stake may not seem substantial, but the fact that Nishant Pitti is considering further sales raises questions about the stock’s short-term prospects. Promoter selling can sometimes indicate an insider’s belief that the stock is overvalued or that future growth may be limited. However, it’s worth noting that such sales can also be driven by personal liquidity needs or portfolio rebalancing and may not necessarily reflect a lack of confidence in the company’s future.

The market reaction and future outlook

Following the block deal, EaseMyTrip shares fell by 7.2% to Rs 38.03 per share. The market reacted swiftly, with many investors taking a cautious approach. However, some market experts believe that this could present an attractive entry point for long-term investors, particularly given the company’s ventures into new sectors and potential for future growth.

The company’s diversification into medical tourism and EV manufacturing could provide new revenue streams, making it an intriguing investment option for those willing to ride out the current volatility. Additionally, with the tourism sector expected to continue its recovery post-pandemic, EaseMyTrip could benefit from increased demand for travel services.

That said, investors should be aware of the risks involved, especially with the potential for further stake sales by the promoter. If Nishant Pitti continues to offload his stake, this could keep downward pressure on the stock in the near term.

Conclusion: Should you be worried about EaseMyTrip share price?

While the EaseMyTrip share price drop following the block deal may be concerning to some, it’s important to look at the broader picture. The Rs 176.5 crore stake sale by the promoter is significant, but it does not necessarily indicate a long-term decline in the stock. In fact, EaseMyTrip’s forays into new sectors like medical tourism and EV manufacturing could position the company for future growth.

For investors with a long-term view, the current dip might represent a buying opportunity. However, those with a lower risk tolerance should keep an eye on further promoter actions and market sentiment before making a decision. Ultimately, it’s a matter of balancing the company’s solid business foundations with the potential short-term volatility caused by the promoter’s stake sale.

As always, it’s crucial to do your own research and consider seeking advice from a financial expert before making any investment decisions.