These 3 BSE 500 firms’ promoters pledged 90% of their shares; should other shareholders worry?

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Updated: Aug 04, 2020 4:28 PM

As many as three BSE 500 constituents had over 90% of their promoter holdings pledged at the end of the April-June quarter.

Other companies with high pledged promoter holding include Jindal Stainless (Hisar), Dish TV, Jindal Stainless, GMR Infrastructure, and Future Retail.

As many as three BSE 500 constituents had over 90% of their promoter holdings pledged at the end of the April-June quarter. These include Kishore Biyani’s Future Consumer, Max Financial Services, and Emami, Kotak Institutional Equities said in a report. However, Kotak clarified that pledging shares did not necessarily imply that a company or a promoter is under financial stress. Only one of these three companies has reported a net loss in their last quarterly results. Max Financial Services and Emami have reported reported a consolidated net profit.

Kishore Biyani and family have pledged 92.5% of their shareholding in the company at the end of April-June quarter. The value of pledged shares of Future Consumer at the end of June 2020 stood at Rs 1,320 crore. Promoters of Max Financial Services have pledged 91.5% of their shareholding and the value of pledged shares stands at Rs 3,790 crore. Emami promoters had pledged 90.5% of their holdings which is valued at Rs 4,790 crore, according to Kotak Institutional Equities. However, as of August 3, the pledged promoter holding in Emami has been brought down to 55.3%.

Shares of Future Consumer are down over 50% year-to-date. The coronavirus aided lockdown has hit the fast moving consumer goods manufacturer as stores shut shop during the lockdown, According to various reports Kishore Biyani is looking to offload certain parts of his Future Group. Shares of Emami Ltd are down 22% since the year began, however the stock has been gaining momentum since June. On the other hand stocks of Max Financial Services, the insurance arm of Max Group have rebounded strongly and are now up 3% year-to-date. The stock price has surged 90% from its March lows.

Other companies with high pledged promoter holding include Jindal Stainless (Hisar), Dish TV, Jindal Stainless, GMR Infrastructure, and Future Retail. However, the report added that the value of pledged promoter (majority shareholder) holdings declined sharply to 1.95% in the April-June 2020 quarter from 2.34% in the January-March 2020 quarter. This is the lowest since June 2018, when pledged shares as a percentage of total promoter holdings stood at 2.78%.

Companies that saw a decline in their pledged promoter holdings include, Adani Ports & SEZ, Granules India, IndusInd Bank, and Parag Milk Foods

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