Promoter pledging drops in Q1 even as stocks in broader market extend gains

Share pledging by promoters came down during the March 2021 quarter amid stocks in the broader market extending their gains.

According to a report by Kotak Institutional Equities (KIE), the value of pledged promoter holdings as a percentage of promoter holding declined to 1.64 per cent in March 2021 quarter from 2.09 per cent in the December 2020 quarter. The value of promoter pledged holdings stood at Rs1.6 trillion, 0.81 per cent of the total market capitalisation of the BSE 500 index.

About 85 companies in the BSE-500 Index had pledged part of their holdings at the end of the March 2021 quarter. For the first time after many quarters, there wasn’t even a single company where promoters had pledged more than 90 per cent of their holdings. A year ago, there were five such firms.

“We have seen widespread decline in promoter pledged holding in almost all Nifty-50 companies...We clarify that pledging of shares does not necessarily imply that a company or a promoter is under financial stress; banks (lenders) could have sought additional security in the form of promoter shares,” said KIE in a report.

IndusInd Bank, Aurobindo Pharma, Aster DM Healthcare, Wockhardt, and Ashok Leyland were companies that saw a substantial increase in pledged promoter holdings. Adani Ports & SEZ, Crompton Greaves Consumers, Adani Transmission, Time Technoplast and Laurus Labs saw a decline in promoter pledging.

Aster DM Healthcare and IndusInd Bank saw fresh promoter pledges, while Dhanuka Agritech’s promoters released their entire pledged holdings.

During the March 2021 quarter, the Nifty, Nifty Midcap 100 and Nifty Smallcap 100 rose 5.1 per cent, 13.7 per cent and 14.5 per cent respectively.