HYDERABAD: The percentage of pledged promoter (majority shareholder) holdings by value of BSE-500 Index reduced in the quarter ended March 2019 over the previous quarter, according to an analysis by Kotak Institutional Equities Research. The percentage of pledged promoter holdings declined to 2.83 per cent during the March quarter compared to 2.98 per cent in December 2018 quarter. The outstanding promoters’ pledged shares stood at Rs 1.95 lakh crore, which is about 1.38 per cent of the total BSE-500 Index’s market capitalisation during the March quarter.
Pledging of shares does not necessarily imply that a company or a promoter is under financial stress. Sometimes, banks also seek additional security in the form of promoter shares. A case in point is Jet Airways India Ltd, where banks insisted promoter Naresh Goyal to pledge his shares with lenders when the latter couldn’t honour debt payments. In other cases, promoters take loans against pledging of shares to use the proceeds either for personal or business purposes. Companies with high promoter pledged shares are considered risky especially during tightening liquidity conditions.
According to the Kotak report, promoters of 116 companies pledged their holdings among BSE-500 Index. Six companies had more than 90 per cent of their promoter holdings pledged. Companies whose promoters pledged more than 95 per cent of their holdings: CG Power and Industrial, Reliance Infrastructure, Reliance Capital and Sterlite Technologies, while firms such as JK Tyre & Industries, Reliance Capital, Reliance Infrastructure, Dish TV saw the highest increase in pledged promoter holdings.
On the other hand, Granules India, Strides Pharma, Reliance Communications, Coffee Day Enterprises and Bajaj Consumer Care and others reported a decline in their pledged promoter holdings, while entities like JK Tyre & Industries, VA Tech Wabag, Forbes & Company, S H Kelkar and Company saw fresh promoter pledges during the quarter under review. Interestingly, none of the promoters in the BSE-500 Index revoked their entire pledged holdings.
D1.95 lakhs crwas the outstanding promoters’ pledged shares on BSE-500 Index in Q4, 116 promoters pledged their holdings on BSE-500 Index, says a Kotak report had more than 90 per cent of promoter holdings pledged on nifty.
Some firms in the Nifty-50 with more than 5% of pledged promoter holdings include Adani Ports & SEZ (42.3%), Asian Paints (12%), Indiabulls Housing Finance (12.7%), JSW Steel (46.3%), Sun Pharma (11%) and Zee Entertainment (66.2%).