33 firms disclose pledging of shares to avail loans

With the Securities and Exchange Board of India (Sebi) making it mandatory for companies to reveal pledging of shares, disclosures of the same by promoters of listed companies are pouring in.

Since January 21, when Sebi announced that this disclosure would be required, 33 companies have revealed the pledging of shares by their promoters to avail loans.

As per Sebi’s new guideline, all companies will have to disclose information about shares pledged by promoters within a period of seven days after the promoters give the companies an intimation. Effectively, these disclosures are likely to come within 14 days.

Stock market analysts are also awaiting disclosures from some front line companies. “There are rumours about some front line companies also pledging their shares but neither have they denied it nor have they disclosed it yet,” said a research head with a Mumbai-based brokerage.

In developed countries such as the US, not only promoters but directors too are required to disclose their pledged shares. In the UK, this is covered under insider trading regulations.
 

Shares pledged by the promoters of Indian companies since the Securities and Exchange Board of India made such disclosures mandatory on January. 21, 2009.
	Shares pledged	% of paid-up shares	Lender
Micro Inks	1,75,34,718	70.50	NA
Bhuwalka Steel	15,56,170	30.00	NA
Ganesh Housing Corp.	97,96,427	30.00	ICICI Bank
Radaan Mediaworks	1,25,00,000	23.08	IOB
Dolphin Offshore Ent.	21,36,512	22.34	SBI
Pasupati Acrylon	1,51,25,000	21.26	IFCI Ltd
Torrent Power	5,22,87,000	20.97	NA
SSPDL	25,85,850	20.00	SBI
Kriti Industries	1,23,67,640	19.95	IDBI Bank
Shyam Telecom	22,00,000	19.52	SBI
Asian Paints	1,43,71,909	14.98	NA
Great Offshore	55,27,592	14.88	NA
Fluidomat	7,34,078	14.83	NA
Khandwala Securities	17,33,321	14.52	Bajaj Auto
Murudeshwar Ceramics	22,78,840	13.02	IDBI
C&C Construction	23,00,000	12.60	Bank of Raj.
Bilpower	11,60,000	11.05	NA
Note: Filtered for companies where promoters have  pledged shares in excess of 10 per cent of paid-up shares      Source Bloomberg

Analysts are of the view that most of the promoters were hesitating to disclose as there is fear among investors that pledging of shares would cost promoters dear.

The company promoters will get loans against the prevailing market price of the shares. However, over the past six months, a host of lenders have invoked the pledges and sold promoter shares in the market, as the value of the share fell below the amount of loan extended and promoters were unable to give the margin to fill this gap.

“Though there has been a current negative bias towards pledging of shares, this has been an old method of promoters to raise money and many do it to support the company too. So, investors should not be scared if promoter shares are pledged,” said a stock broker.

However, the Satyam fiasco, where promoter Ramalinga Raju had pledged a big chunk of his holding, has caused panic among foreign fund managers too.

Speaking on the sidelines of a conference recently, Adrian Mowat, managing director and emerging market strategist at J P Morgan had said that disclosures about pledging of shares may go a long way in instilling confidence among investors.