Promoters pledge their shares either for capital requirement for business or for a personal reason including other investments
Recently there was turmoil in some stocks due to high pledge shareholding by promoters.
Pledging of shares is not essentially considered bad or should not be taken in a negative way but fierce selling in stocks from Reliance ADAG, Essel Group (including Zee Ent) and Apollo Hospitals in the recent past has made investors cautious.
Promoters pledge their shares either for capital requirement for business or for a personal reason including other investments. But, the lender has the authority to sell the shares in case promoter fails to meet the margin call.
So, is there a need to panic if you hold a stock where promoters have pledged their shares?
Udayan Mukherjee, Consulting Editor of CNBC TV18, says if the amount of pledge becomes very large, say a promoter pledges 60-70% of his/her stake, then it is a concern. About 10-15% pledged stake is not unusual.Watch the accompanying video for more...Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.