Top 20 stocks that saw increase in promoters' pledged holdings in Q3FY18

Pledged holdings data for BSE-500 companies revealed that the share of promoters' pledged holdings as against all pledged holdings slipped sharply in the December quarter in comparison to the previous quarter, Kotak Institutional Equities said in a note.

The share of promoters' pledged holdings reduced to 7.8 percent in the quarter gone by from 8.3 percent at the end of September.

In all, promoters pledged shares worth Rs 1.98 lakh crore, which is about 1.47 percent of the total BSE-500 Index’s market capitalisation at the end of December, the report said.

Let us first understand why promoters pledge their shares? Promoters, like investors, can pledge their shares for any reason but the most common one is to raise finance. They essentially borrow against the shares they hold.

A loan taken by a promoter can be used for expansion purposes or to meet the immediate liquidity requirements of the company. The financial institution with which the promoter has pledged the shares uses them as collateral and can sell it if it falls below the agreed value in the contract between the company and the loan provider.

Historically, it is seen that shares of companies with high pledged promoter holding tend to witness higher volatility. Data suggests that promoters of 129 companies pledged their holdings among BSE-500 index stocks, Kotak Institutional Equities said in a note.

Nine companies had more than 90 percent of their 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 promoters’ shares,” it said.

Companies that saw an increase in promoters' pledged holdings in the December quarter include names like JSW Steel, DB Corp, McLeod Russel, Max Financial Services, Reliance Power, Bajaj Corp, Omaxe, Century Textiles, Gayatri Projects etc. among others.

Promoters of Granules India, Future Lifestyle, and Reliance Communications decreased their pledged holdings. Companies whose promoters pledged more than 95 percent of their holdings include companies like Bajaj Hindustan, CG Power and Industrial, Reliance Naval and Engineering, JBF Industries, Suzlon Energy, IL&FS Transportation Networks and Fortis Healthcare.

Fresh promoters’ pledges were seen in SRF while promoters who revoked their entire pledged holdings: Astral Microwave and GE Shipping.

Companies in the Nifty50 with more than 5 percent of the pledged promoter holdings include Adani Ports & SEZ (24.7 percent), Asian Paints (14 percent), Indiabulls Housing Finance (12.5 percent), M&M (5.8 percent), Tata Motors (5.3 percent) and Zee Entertainment (45.7 percent), said the Kotak report.