Promoters' pledged shares rise marginally in Q3, only 1 company sees over 90% holding pledged

The pledged holdings of promoters in BSE500 companies increased marginally in the December quarter of FY21 to 2.09 percent of total promoter holding from 2.03 percent in the September quarter.

Promoters of 84 companies in the BSE500 index had pledged all or part of their holdings in the December 2020 quarter. The value of promoter pledged holdings was Rs 1.8 lakh crore at the end-December 2020, which is about 1.04 percent of the total BSE500 Index’s market capitalization, said brokerage firm Kotak Institutional Equities in a note.

Only one company - Future Consumer- had more than 90 percent of its promoter holdings pledged.

"We clarify that pledging of shares does not necessarily imply that a company or a promoter is under financial stress; banks (lenders) could have sought additional security in the form of promoter shares," Kotak said.

The report further said promoters of Future Consumer pledged more than 90 percent of their holdings whereas Adani Ports & SEZ, Future Consumer and Strides Pharma Science saw the highest increase in pledged promoter holdings during the December quarter.

On the other hand, Dish TV, Lemon Tree Hotel, Wockhardt, Time Technoplast and India Cements were among the companies that witnessed a decline in pledged promoter holdings.

Adani Ports & SEZ (38.2 percent), Asian Paints (10.7 percent), JSW Steel (22.1 percent) and Sun Pharmaceuticals (9 percent) were the Nifty50 companies with more than 5 percent of pledged promoter holdings.

Aarti Industries, Bliss GVS Pharma, Sun TV Network, Ulfex, UPL and V-Mart Retail were the companies in which promoters revoked or creditors invoked entire pledged holdings, Kotak said.

In a general sense, an increase in pledge is seen as a negative sign for the company’s shareholders, but a decreasing trend can be seen as a positive sign.

A higher percentage of promoter pledge may lead to higher risk and volatility in the stock price.

In the December quarter of FY21, equity barometer Sensex rose more than 25 percent. The market showed a strong recovery since the March 2020 lows and ended the year with double-digit gains.

In the year 2021 so far, Sensex is up about 8 percent. Experts are positive about the long-term prospects of the market even though intermittent profit-booking cannot be ruled out.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.