Pledging of shares

Pledging of shares came into limelight after Satyam episode. Many Companies are disclosing pledging of shares by promoters, according to SEBI recommendations. What is pledging of shares by promoters? It means raising funds by promoters for their personal or company needs by pledging their shares in the company as a collateral security to either banks or Non-Banking Financial Institutions. Promoters may need funds either for personal needs or for Company expansion etc. Why one should be careful with promoter pledging?

In Bear market, stocks sometimes suddenly lose even 50% of value in few sessions. Lenders may ask promoters to cover margins by either paying money or pledging more shares. If promoters failed to do so, lenders resort to selling of shares in the open market which lead to huge fall in stock price which is like adding fuel to the already falling stock

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Pledging of shares is either positive or negative news depending on the situation. "Why promoter raised funds by pledging shares?" is the most important point. If it is for personal needs (Satyam), it is a bad signal. If it is for company needs, then we should ask 2 questions. Whether it is for mindless expansion or wonderful business opportunity?

Note: Intelligent promoters are just disclosing the number of shares but hiding the purpose of loans which is crucial for investors to take a call on the company. They are disclosing pledged shares information in the holding companies. Significant disclosures by Promoter on pledging of shares:

1. Maytas Infra: Promoters pledged 100% of their stake with lenders.

2. Tata Coffee: Tata Sons pledged 100% holding in the company. Tata Tea pledged 57.5% stake in the Tata Coffee. Tatas seem to have pledged everything to raise funds for their mindless expansions.

3. Tata Sons: Promoters pledged 13.5% stake in Tata Steel, 3.5% stake in Indian Hotels and 14.6% stake in Tata Power. Tatas pledged 95% stake in Tata Teleservices. Promoters pledged 28% of their stake in Tata Motors.

4. Unitech: Rumors of huge stake pledging by promoters. Bad signal.

5. India Cements: promoters pledged 82% of their stake in the company. Bad news.

6. Zuari Industries: 70% of their stake was pledged by promoters.

7. Bombay Rayon: Promoters pledged 18.43% stake in the Company. They pledged with Export Import Bank of India as a collateral security for the loan sanctioned to the firm.

8. Nagarjuna Fertilisers: Promoters pledged 24.56% stake. This is a huge concern as promoters already have tainted image.

9. Ganesh Housing: 30% stake was pledged by promoters.

10. Torrent power: Promoters pledged 21% stake of the company.

11. Aban Offshore: Promoters pledged 8% stake (voting rights) of the Company.

12. JP Hydro: Promoters pledged 60% stake to raise funds for power projects

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13. Radaan media works: 23% of stake was pledged by promoters.

14. Time Technoplast: Promoters pledged their entire 28% stake of the company.

15. Micro Inks: Promoters pledged 70% stake of the company.

16. Ansal Housing: 30% of the stake was pledged by promoters.

17. Rain Commodities: 21% stake was pledged.

18. UTV Software: Promoters pledged 23% stake of the company.

19. Karuturi Network: Promoters pledged their entire 22% stake of the company.

20. Gujarat NRE Coke: Promoters pledged 16% stake.

21. Asian Paints: Promoters pledged 15% stake of the company

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22. Kitply Industries: Promoters pledged 35% stake of the company.

23. Great offshore: Promoters pledged 15% stake of the company. 24. Shyam Telecom: Promoters pledged 20% stake of the company. 25. Dolphin Offshore: Promoters pledged 30% stake of the company. 26. Jindal Drilling: Promoters pledged 26% stake of the company. 27. Jubilant Organsys: Promoters pledged 13.66% stake in the company. 28. SRF: Promoters pledged 32% stake in the company. 29. Kamat Hotels: Promoters pledged 47% stake of the company. 30. Ahluwalia Contracts: Promoters pledged 18% stake but they have not disclosed the cause. 31. Dhanush Technologies: Promoters pledged 34% stake in the Company for company and personal needs. 32. Mascon Global: Promoters pledged 52% stake but cause is unknown. 33. Dhampur Sugar Mills: promoters pledged 18% stake in the company for company needs. 34. Cranes Software: promoters pledged 27% stake in the company. 35. Bil Power: Promoters pledged 11% stake of the company. 36. Haldyn Glass: 40% of company stake was pledged by promoters. 37. Karuturi Global: Promoters pledged their entire 18% stake in the company. 38. Zicom Security Systems: Promoters pledged their entire 13% stake . 39. MRO-TEK: Promoters pledged their entire 38% stake of the company