Pledging of shares by promoters at seven-year high


CHENNAI: Pledging of shares by promoters in companies listed on the NSE (National Stock Exchange) hit a seven year high at the end of June. Promoters’ share pledging increased 11.29% year-on-year (y-o-y) to 1.98 lakh crore at the end of June and touched 2.08 lakh crore in the second week of August, data showed.

The percentage of promoter holdings pledged went up from 15.57% a year ago to 16% at the end of June, according to PRIME Database, which compiles data on the primary capital markets. It further increased to 16.21% as on August 11, data showed. As a percentage of total market capitalisation, pledging has gone up from 8.39% a year ago to 8.51% in June.

The largest pledge creation transaction in the last one year was that of Tata Sons, the promoter of information technology major Tata Consultancy Services (TCS). Tata Sons pledged 1.70 crore shares of TCS in January to LIC through Centbank Financial Services, with the value of the pledged shares being pegged at 3,902 crore. In all, creation of pledges took place in 258 companies during this period.

The largest release of pledged shares transaction was that of Vinod Shantilal Adani of Adani Ports and Special Economic Zone in September last year. Adani released 7.30 crore shares of the company worth about 2,359 crore. In all, release of promoter pledges took place in of 210 companies during this period.

“This (increase in pledging) can be attributed mainly to the rise in share prices,” said Pranav Haldea, managing director, PRIME Database. The mid-cap, small-cap and energy indices have seen a sharp jump in the last one year.

Shares were pledged in as many as 509 of the 1,517 NSE-listed companies, up from 496 companies last year. High pledge levels however are typically not considered a good sign by investors as a downturn in the market price can lead to invocation of pledges and even a change in management.

There were 31 companies in which the complete holding (100%) of the promoters was under pledge at the end of June. This included Bajaj Hindusthan Sugar, Bharati Defence & Infrastructure, Consolidated Construction Consortium, Gokaldas Exports, IL&FS Investment Managers, IVRCL, Subex, Sujana Metal Products, Tantia Constructions, Venus Remedies and Visa Steel.

While more than 90% of the promoters’ shareholding was pledged in 79 companies, more than 50% of promoters’ stake was pledged in as many as 212 companies, data showed. There were as many as 42 companies in which pledged shares were brought down to zero in the last one year. The maximum shares in value terms were pledged to Kotak Group and was followed by LIC in the last one year.

Shares of promoters of as many as 45 companies were invoked in the past year. The company in which the maximum value of shares were invoked was United Breweries (442 crore). In the previous year, shares of promoters of 47 companies had been invoked.