Promoters pledging their shares – either for personal or business needs – is not new. However, the pledged value as a percentage of the market capitalisation (m-cap) of stocks of these companies rose to its highest level in four quarters – at 10.1 per cent (up 27 bps quarter-on-quarter), says a recent Morgan Stanley’s India Strategy report - “Tracking Promoter Pledging: What’s at stake?”
During the September 2012 quarter, 790 companies disclosed pledges on their holdings, the report says. As of end-September 2012, the total value of pledged stocks was $27 billion, up 16 per cent quarter-on-quarter (q-o-q). In rupee terms, the total pledged value stood at Rs 1.42 trillion, up 10 per cent q-o-q.
Sector-wise trends
During the quarter, the financials and technology sectors saw the largest drops in share of pledging, while healthcare and consumer staples witnessed the most gains, data from the report suggests.
At the end of the quarter, consumer discretionary, followed by the materials sector saw the biggest pledging by promoters in value. However, as a percentage of market-cap, pledging was highest for utilities and financial sector while as a percentage of promoter holding, the percentage of pledging was the highest for energy and the lowest for the technology sector, the report says.
From Morgan Stanley’s coverage universe, 40 companies reported pledges (totalling $10 billion). Among Sensex constituents, nine companies reported pledges worth $2.8 billion.
“Out of the 797 companies that reported pledging in June 2012, 18 have revoked their full pledges on shares. An additional 38 companies reported fresh promoter pledging during September 2012. Notably, 311 companies reported lower pledging versus the previous quarter, while 128 companies increased pledging versus the previous quarter,” the report says.
Around 310 companies have kept their level of pledging (in per cent) unchanged. In addition, 15 promoters increased their pledging by more than 25 per cent during the September 2012, while eight promoters brought down pledging by 25 per cent or more. Out of the 790 companies that have reported pledging, promoters of 254 companies have pledged more than 50 per cent of their holdings.
