Promoters of at least half a dozen property and infrastructure developers have pledged lion share holdings in their companies to raise finances. Some of these companies have been included in the BSE Realty index.
Analysts say the trend is the offshoot of the downturn in the real estate business with the sector going down in the priority list of lenders. ?The downturn in the business has seen a negative cash flow for many real estate and property developers. This, in turn, had hit their credit ratings making borrowing from the market difficult and costlier. This is a major factor which forced promoters to resort to pledging of shares to meet working capital needs,? an analyst with a leading fund house said, adding ?also, most of the real estate companies have a high debt to equity ratio and the pledge had helped them to avoid taking more debt into their books.?
?The current revival in the market has improved cash flow of some of the companies. Despite a surge in stock prices, some of the promoters of real estate companies had recently redeemed at least a part of their shares?, an analyst with a local brokerage house said.
According to information gathered by FE, the promoters of at least six major infrastructure and property development companies had pledged more than 50% of their shares with banks and financial institutions as on the quarter ending June. These firms are Horizon Infrastructure, Ansal Properties, Parsvnath Developers, Unitech, Orbit Corporation and Ackruti City.
Promoters of Horizon Infrastructure had pledged 96.47% of their shareholding with banks and financial institutions which translates into close to 51% of the total equity capital of the company. Similarly, promoters of Ansal Properties and Infrastructure had pledged 86.17% of their stake, while promoters of Parsvnath Developers had raised funds by pledging 80.23% of their stake as of the end of June quarter.
While promoters of Unitech had pledged 69.55% of their holdings which translates into 32% of the outstanding stocks of the company, the promoters of Orbit Corporation had pledged 67.67% stake. Promoters of Ackruty City has also pledged over 50% of their stake in the company to raise funds.
Others with a high incidence of pledged shares include PBA Infrastructure (47.16%), DS Kulkarni (39.69%), DB Realty (64.03%), and Peninsula Land (26.77%). Promoters of some other firms such as IRB Infrastructure, Marg and Era Infrastructure had recently revoked a part of their pledged shares from lenders. Since June, the average value of BSE Realty index has appreciated from 3,196.82 points to 3,626.57 points as of September 15.