TCS, Adani among firms whose owners borrowed against shares
Sharp recent falls in a handful of Indian mid-cap stocks have raised concerns among investors over the potentially destabilising impact of margin calls on shares pledged by company owners.
June 26, 2011 / 19:23 IST
Sharp recent falls in a handful of Indian mid-cap stocks have raised concerns among investors over the potentially destabilising impact of margin calls on shares pledged by company owners.
While pledging shares is a popular way for owners to raise short term capital, minority investors can suffer in the event of a margin call if that ultimately forces lenders to sell shares they hold as collateral.Of 1,310 companies with more than Rs 1 billion (USD 22 million) market capitalisation, promoters of 445 companies had outstanding pledged shares at the end of March, according to a Bank of America Merrill Lynch report released on Friday.The total value of pledged shares was about USD 33.2 billion, or 2.4% of India's total market capitalisation of USD 1.4 trillion, Bank of America-Merrill Lynch said.Tata Consultancy Services, India's biggest software services firm, had the most promoter-pledged shares by value, at USD 4.9 billion, the note said.United Spirits, Nagarjuna Fertilizers and India Cements were among 17 companies with more than 90% of their promoter holdings pledged, according to the report.Promoters of another 116 companies including Unitech, Suzlon Energy and Adani Power had 50-70% of their holdings pledged as of March, it said.The 30-share BSE Sensex is down 11% year-to-date. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
