India Inc's pledged holdings reach Rs 1.4 lakh cr

The value of shares pledged by the promoters of listed companies in India reached Rs 1.4 lakh crore level at the end of last fiscal, with one in every five firms having some part of their promoter holdings encumbered.

The companies from industrial sectors accounted for the largest amount of pledged shares, followed by healthcare and consumer discretionary segments, a report by financial services major Edelweiss said today.

"At Q4FY13-end, from the universe of 3,861 companies that have declared their shareholding, promoters of 788 companies (over 20%) have pledged part of their holdings.

"Value of pledged holding stands at Rs 1.4 lakh crore during the quarter," said the report tiled Pledge: Risk 'O' Meter'.

Pledging has been active in some of the capital-intensive industries owing to limited sources of funds.

Promoters of companies, at times, in order to raise capital for business purposes pledge their shares with lenders as collateral. If the company defaults on payments, the lenders can recover the cost by selling pledged shares in the open market.

In early 2009, Sebi made it mandatory to disclose pledge share data, and since then this data has been under the scanner of the investor community.

Among the major companies, those with a substantial portion of promoter holdings pledged included United Spirits (about 96.95%), HDIL (96.11%) and Unitech (75.72%). Promoters pledge in United Spirits and HDIL has been above 90% for three quarters now, it said.

Among the Nifty-50 companies, Asian Paints had the highest promoter pledge, although it declined from 17.67% to nearly 15.48% during the last quarter.

The other companies with significant promoter pledging included Essar Ports (99.74%), Pipavav Defence (96.98%), Wockhardt (87.06%), Jaypee Infratech (67.3%) and Fortis Healthcare (63.77%).

These also included Suzlon Energy, Pipavav Defence, Era Infra Engg, Unitech, India Cements, Future Retail, Lanco Infratech, Omaxe, Dish TV and JSW Steel.