Promoters turned cautious with share pledging in June quarter, shows data

The value of pledged promoter holdings in the BSE 500 companies during the June quarter declined to 1.95 per cent, from 2.34 per cent in the previous quarter. The number of companies were promoters, or major shareholders, have pledged their holdings stood at 89, down from 105 during the March 2020 quarter, the data analysed by Kotak Institutional Equities showed. 

The brokerage said the decline is on account of rejig in the BSE 500 index and also due to the complete release of pledged shares in case of some companies. Typically, promoters pledged their shares to generate liquidity. 

If a stock falls, promoters have to provide more shares to maintain the cover or repay the lender. In the past, lenders have sold shares of some companies in the open market after promoters failed to maintain the cover. 

 

 

This prompted many promoters turn cautious. At the end of the June quarter, Rs 1.3 trillion worth of promoters shares were pledged — less than 1 per cent of India’s total market cap.

The companies where over 90 per cent of promoter shareholding is pledged declined from five in the March quarter to just three — Future Consumer, Max Financial Services, and Emami. 

DB Corp, Zee Entertainment, and Metropolis Healthcare saw the highest increase in pledged promoter holding. Adani Ports & SEZ, Granules India, IndusInd Bank and Parag Milk were on the other end of the spectrum.