Pledging of shares by promoters at 7-year high: Prime Database

Pledging of shares by promoters in NSE-listed companies hit a seven-year high in the quarter ended December 2015, according to Prime Database, India's premier database on the primary capital market.   

Mr. Pranav Haldea, Managing Director of Prime Database, said promoter share pledging saw an increase of 14 per cent in the last quarter of calendar year 2015, with the value of pledged shares going up to Rs 2.03 lakh crore as on 31st December 2015 compared to 1.78 lakh crore as on 30th September  2015. 

According to him, given the fall in equity markets, this points to a high level of financial distress.

"Even in terms of percentage of promoter holding pledged, the same has gone up from 43.92 per cent a year back to 46.35 per cent on 31st December 2015," a press release from Prime Database said.

According to it, as on 31st December 2015, there were pledged shares in as many as 517 of the 1506 NSE-listed companies, up from 370 companies six years ago. 

Also during this six-year period, the percentage of total promoter holding pledged has gone up dramatically from about 27 per cent to 46 per cent, with the value of pledged shares going up from Rs. 1.28 lakh crore to Rs. 2.03 lakh crore.

Mr. Haldea said high pledge levels were typically not considered a good sign by the investors as a downturn in the market price could  lead to invocation and change in management. 

"Surprisingly, there were as many as 25 companies in which the complete holding (100 per cent) of the promoters was under pledge as on 31st December 2015," he said.

According to the release, these companies are AGC Networks, Ankit Metal & Power, Bajaj Hindusthan Sugar, DQ Entertainment (International), Eastern Silk Industries, Era Infra Engineering, Gokaldas Exports, IL&FS Investment Managers, Impex Ferro Tech, Ind-Swift Laboratories, IVRCL, Paramount Communications, Parenteral Drugs (India), Pipavav Defence & Offshore Engineering,  PSL, Raj Rayon Industries, Rajshree Sugars & Chemicals, Rohit Ferro-Tech, S.A.L.Steel, SEL Manufacturing, Servalakshmi Paper, Spentex Industries, Subex, Surana Industries and Suryajyoti Spinning Mills.

In all, there were as many as 79 companies in which more than 90 per cent of the promoter's shareholding was pledged and 208 companies in which more than 50 per cent of the promoter’s shareholding was pledged.

The release said that, by value of pledged shares, the top 10 companies were: Adani Ports & Special Economic Zone Ltd (Rs. 10,065 crore); Cairn India Ltd. (Rs. 8,914 crore); Tata Consultancy Services Ltd. (Rs. 6,976 crore); JSW Steel Ltd. (Rs. 6,608 crore); Essar Oil Ltd. (Rs. 6,558 crore); Zee Entertainment Enterprises Ltd. (Rs. 6,302 crore); Reliance Power Ltd. (Rs. 5,932 crore); Asian Paints Ltd. (Rs. 5,902 crore); JSW Energy Ltd. (Rs. 4,866 crore); and GMR Infrastructure Ltd. (Rs. 4,795 crore).

Companies which moved from zero per cent to a high per cent pledging of promoters' holding in September-December 2015 quarter were JMT Auto (0 to 93 per cent), Bedmutha Industries (0 to 50 per cent), and Khaitan Electricals (0 to 42 per cent). Other cases of huge increases were Zenith Birla India (33 to 88 per cent), Sharon Bio-Medicine (7 to 40 per cent), Shriram EPC (6 to 30 per cent), Melstar Information Technologies (66 to 88 per cent) and Uttam Sugar Mills (12 to 33 per cent), the release said.

Overall, there were 82 companies in which the percentage of promoter holding pledged increased in this period, it said.

On the other hand, the top 10 companies which saw a decrease in pledging of promoters' holdings were Mangalam Cement (52 to 0 per cent),  Ashapura Minechem (36 to 0 per cent), Tree House Education & Accessories (43 to 12 per cent), NCL Industries (68 to 38 per cent), Mangalam Timber Products (28 to 0 per cent), Prakash Industries (75 to 50 per cent), Century Enka (20 to 0 per cent), Ganesh Housing Corp. (47 to 29 per cent), Gujarat NRE Coke (100 to 81 per cent) and Sical Logistics (67 to 50 per cent) .

There were nine companies in which pledged shares were brought down to zero during this period: Mangalam Cement, Mangalam Timber Products, Century Enka, Astec Lifesciences, Sanghvi Movers, Jay Shree Tea & Industries, Essel Propack, Blue Star and Vaibhav Global. Overall, there were 78 companies in all in which the percentage of promoter holding decreased in this period.

The largest pledge creation transaction in the quarter was that of S.B.Adani Family Trust, promoter of Adani Ports & Special Economic Zone, pledging 7.60 crore shares on 13th October 2015 to IDBI Trusteeship Services, the value of the pledged shares being Rs. 2,459 crores. In all, shares of promoters of 115 companies were pledged during September-December 2015 quarter.

The largest release of pledged shares transaction was that of Adani Properties Pvt.Ltd., also a promoter of Adani Ports & Special Economic Zone on 6th November 2015. As many as 6.61 crore shares worth approximately Rs. 1,883 crore were released. 

In all, shares of promoters of 100 companies were released during September-December 2015 quarter, it said.

In terms of the pledgee, maximum amount of shares were pledged to Kotak Group followed by Indusind Bank during the quarter.

In all, shares of promoters of as many as 19 companies were invoked in September-December 2015 quarter.

The company in which the maximum value of shares were invoked during the quarter was Pipavav Defence & Offshore Engineering Co.(Rs. 300 crore), the release added.

NNN