What's common between stock market today & cult movie The Godfather?

Explaining the ongoing supply of shares in the form of promoter and private equity (PE) selling in India, Kotak Institutional Equities used the analogy of cult movie The Godfather, saying there are high valuations across most sectors and stocks and promoters and PE investors just 'can't refuse' the opportunity.

In the 1972 movie Godfather,  "I'm gonna make him an offer he can't refuse" was said by actor Marlon Brando while playing the fictional character of Don Vito Corleone. 

Kotak evoked the scene, suggesting as long as valuations remain high, private equity investors and promoters would not mind selling shares. Kotak said promoters have been increasingly monetising their holdings through secondary market or strategic transactions and said high valuations may help overcome ‘ownership’ hurdles. 

"We wonder if promoters of Indian companies will increasingly treat their ownership in companies as investments and be willing to sell an even larger portion of their companies purely on commercial logic."

Kotak said PE investors may sell shares at the ‘right’ valuations, as it is a straightforward business proposition for them. 

"They hold substantial stakes in many listed companies, which will be sold eventually. We note that PE investors have sold large amounts of their stakes in companies through IPOs and secondary offerings (block deals) in the past few years, which suggests they find current market and stock valuations sufficiently attractive to exit part of their positions," it said.

Bharti Airtel, InterGlobe Aviation and Vishal Mega Mart are some of the companies seeing higher promoter selling this year. Companies such as Billionbrains Garage Ventures (Groww), Lenskart, Hexaware Technologies, Vishal Mega Mart, One 97 Communications (Paytm), Mphasis and Swiggy have high PE/VC stakes.  

Will there be more supply ahead?

Kotak said the answer to this common question from investors will depend on valuations of the market and stocks: the higher the valuations, the greater the supply; and strategies of majority shareholders. 

It believes even the government can look to divest its holdings in PSUs, given rising fiscal pressures and high valuations of many PSU 
stocks. The government owns more than 51 per cent of many non-financial and financial PSUs and has been a reluctant seller in  PSUs. 

It has consistently missed its divestment targets in the  past few years. The sharp increase in dividends from the RBI has compensated  for lower divestment revenues in FY2024-25, but FY2026-27E may see higher fiscal pressures, given the large GST rate cuts from September 2025, it said.