Promoters release pledged shares, look for options to raise funds

Even as some of their peers default on their debt repayments against pledged shares, several Indian promoters have initiated talks with lenders to release their pledged shares by raising funds from other sources, which includes selling part of their stake or selling other assets, say bankers.

While promoters of Emami, Adani Power, and Adani Ports have already released part of their pledged shares by paying off lenders in the first two months of 2019, more such transactions are expected in March – the last quarter of 2018-19, add bankers.

“The crisis at Zee Telefilms and Anil Ambani-led Reliance group companies is a big wake-up call for the Indian promoters. They are looking at several options to raise funds, so that they can release their pledged shares,” says a lender.

In both Zee and Reliance Group, the promoters will have to sell their assets, as a sharp fall in their share prices forced them to top up their already pledged shares.

Statistics submitted to the BSE show that among the BSE 200 companies, the pledged stake as percentage of total equity in Crompton Greaves Consumer was down by 16.29 percentage points between December 2018 and March 1. It was followed by Adani Power, where the promoters reduced their pledged stake by 10.48 percentage points of total equity (see chart).

Emami promoters reduced their pledged shares by 7.6 percentage points of equity after they raised Rs 1,600 crore by selling 10 per cent of their shares. The proceeds of the sale were used to pare pledge on rest of their stake.  After sale, the promoters own 62.3 per cent stake in Emami.

The promoters of Adani Ports also reduced their pledged shares by 5 percentage points by March 1, when compared to their December-end pledged shares. The promoters of JSW Energy also reduced their pledged shares by 10 basis points as of March 1, but their pledged stake rose by another 10 percentage points in the case of JSW Steel between December 31 and March 1 this year.

Interestingly, the pledged shares of few of the promoters have gone up in the first two months of the year — alarming both minority shareholders and the regulators. The pledged shares in Shriram City Union was up by 20 percentage points of total equity, while that in Mindtree increased by 19.5 percentage points, and by 7 percentage points in Reliance Capital.

The lenders to the promoter entities of both Zee Entertainment and Anil Ambani group companies have agreed to accept a standstill agreement after the share prices of both group companies fell sharply.

Promoters of both groups have announced that they would sell their assets to repay their debt. The Reserve Bank of India has said it would look at the standstill agreements signed by the lenders with the borrower entities to find out whether there was any evergreening of loans.