CG Power and Industrial, Kwality, Reliance Naval and Engineering, IL&FS Transportation Networks and Sterlite Technologies are the five companies from the BSE-500 index, whose promoters have pledged over 95 per cent of their holdings in the December quarter of financial year 2018-19 (Q3FY19), suggests a recent report by Kotak Securities.
By definition, share pledging means taking a loan against the shares that one / promoter holds. The promoters can pledge their shares in order to meet various business or personal requirement. However, pledging of shares does not necessarily mean that a company or a promoter is in financial crisis as lenders could have sought additional security in the form of promoter shares.
At the exchanges, barring Reliance Naval, rest all the four stocks gave negative returns during the period. Data fetched from database ACE Equity shows shares of IL&FS Transportation Networks plunged nearly 50 per cent during the December 2018 quarter, while that of Kwality dropped over 34 per cent. CG Power and Industrial and Sterlite Technologies fell around 1 per cent each. On the other hand, Reliance Naval and Engineering surged over 19 per cent in the quarter.
The benchmark S&P BSE Sensex fell over 1 per cent during the period while the S&P BSE Midcap and the S&P BSE Smallcap gained 4 and 2 per cent, respectively, data show.
Overall, the percentage of pledged promoter holdings of BSE-500 stocks, according to the Kotak report, stood unchanged at 6.7 per cent in the quarter under review, similar to September quarter. During the quarter under review, promoters of 116 companies pledged their holdings as compared to 114 companies in the previous quarter.
Outstanding promoters pledged shares stood at Rs 1.96 lakh crore, which accounted for 1.47 per cent of the total market capitalisation of BSE-500 index in December 2018.
Among the Nifty50 companies, Zee Entertainment saw 59.4 per cent of promoter shares being pledged, while the per centage for Adani Ports & SEZ stood at 45.5 per cent in the December quarter, the report says. The percentage of pledged promoter holdings for JSW Steel, IndusInd Bank and Indiabulls Housing Finance stood at 43.6 per cent, 26.4 per cent and 12.7 per cent, respectively.
Companies where pledged promoter holdings declined included Fortis Healthcare, Suzlon Energy, Advanced Enzyme Technologies, Adani Transmission and Indiabulls Housing Finance.
Sonata Software was the only company where promoters revoked their entire pledged holding, while the companies which saw fresh share pledges by promoters included Texmaco Rail, Uflex and Wockhardt.