These high pledge levels are not considered a good sign by investors, as a downturn in market price can lead to invocation and management change, say experts
Pledging of shares by promoters in the NSE-listed companies marginally increased during FY16. As per the data compiled by Prime Database, the percentage of promoter holding pledged, among companies in which at least some shares have been pledged, went up to 45.98% at the end of FY16 from 44.99% at the end of FY15.
However, the total value of pledged shares witnessed a slight dip due to a fall in their market prices. The total value of pledged shares came down to Rs 1.78 lakh crore in FY16 from Rs 1.81 lakh crore in FY15, data showed. The Sensex declined 9.36% during the period.
While there were 25 companies wherein promoters had pledged their entire stake, there were 73 cases of promoter pledging more than 90% of their stake.
“Companies where promoters have pledged their complete holdings include IL&FS and Bharati Defence & Infrastructure. These high pledge levels are typically not considered a good sign by investors as a downturn in the market price can lead to invocation and change in management,” said Pranav Haldea, managing director at Prime Database.
On the other hand, the percentage of pledged shares was brought down to zero in 39 companies including Mangalam Cement, GHCL and ANG Industries.
During the financial year, the largest pledge creation transaction was that of Vinod Shantilal Adani, promoter of Adani Ports & Special Economic Zone. Adani pledged 12.82 crore shares to IDBI Trusteeship. The value of this pledge was Rs 3,999 crore, Prime data showed.