With the equity market on the rise, promoters seem to be deleveraging by reducing their pledged holdings. An analysis of pledged holdings of BSE-500 stocks shows the percentage of pledged promoter-holdings have fallen sharply in the December quarter, to 7.8 per cent from 8.3 per cent in the previous quarter.
Pledged shares in Q3 amounted to Rs 1.98 lakh crore, which is about 1.47 per cent of the total BSE-500 Index’s market capitalisation.
According to BSE data, promoters of 129 companies, among the BSE-500 stocks, pledged their holdings. Out of this, nine companies had more than 90 per cent of their promoter holdings pledged during the period.
Till January this year, pledging of shares by promoters was seen in as many as 2,991 out of the 5,040 BSE-listed companies and their market capitalisation was more than Rs 153 lakh crore.
As of December 2017, companies whose promoters pledged more than 95 per cent of their holdings include Bajaj Hindustan, CG Power and Industrial, Reliance Naval and Engineering, JBF Industries, Suzlon Energy, IL&FS Transportation Networks and Fortis Healthcare.
The highest increase in promoters’ pledged holdings was seen in JSW Steel, DB Corp, Mcleod Russel, Max Financial Services and Reliance Power, while promoters who decreased their pledged holdings include Granules India, Future Lifestyle, Reliance Communications, Crompton Greaves Consumer and Bombay Burmah.
During the past quarter, Astral Microwave and GE Shipping saw promoters revoking their entire pledged holdings:
Companies in the Nifty-50 Index, with more than 5 per cent of pledged promoter holdings, include Adani Ports & SEZ (24.7 per cent), Asian Paints (14 per cent), Indiabulls Housing Finance (12.5 per cent), M&M (5.8 per cent), Tata Motors (5.3 per cent) and Zee Entertainment (45.7 per cent).
Share pledging is typically done by promoters to raise funds either for the same company or for financing other projects.
The decline in the level of share pledging may indicate a reduction in stress as high pledging levels are not considered a good sign by investors as a downturn in the market price can lead to invocation and change in management.
According to BSE data, promoters of 453 companies pledged up to 30 per cent of their holdings to the tune of Rs 1.49 lakh crore, while 139 firms saw 30-50 per cent of the promoters' holding worth Rs 51,124 crore being pledged in January.
Further, there were 80-odd companies in which 50-75 per cent of the promoter-holding worth Rs 34,479 crore was pledged.
The value of shares pledged by promoters of BSE-listed companies reached over Rs 2.72 lakh crore in January, a decline of 10 per cent from the preceding month, according to exchange data.
The value of pledged shares stood at Rs 3.03 lakh crore in December-end. It was at Rs 2.78 lakh crore, Rs 2.81 lakh crore and Rs 2.6 lakh crore at the end of November, October, and September, respectively.