Analysis of the pledged holdings of BSE-500 stocks shows that the value of the promoter (majority shareholder) pledged holdings as a percentage of the promoter holding increased in the December quarter, noted a recent report by domestic brokerage house Kotak Institutional Equities.
Promoter pledged holdings marginally increased to 1.61 percent in the December 2022 quarter from 1.57 percent in the September 2022 quarter, it informed. Promoters of 87 companies in the BSE-500 Index have pledged part of their holdings in the December 2022 quarter, highlighted the report.
Let's take a look at some interesting facts from the December pledged holdings analysis:
1) As per the report, two companies had more than 90 percent of their promoter holdings pledged - Max Financial with 93 percent of its promoters' holding pledged and Thyrocare Tech with 92.9 percent pledged promoter holdings.
2) Apart from these, Suzlon Energy, GMR Airports, Sundaram Clayton, Wockhardt, and Medplus Health also reported over 50 percent pledged holdings by their promoters.
3) The total value of pledged promoter holdings stood at ₹2.2 lakh (which is about 0.83 percent of the total BSE-500 Index’s market capitalization).
4) Llyod Metals and Happiest Minds witnessed fresh promoter pledges in the December quarter. Lloyd Metals' pledged promoter holding in December stood at 11.9 percent from 0 percent in the September quarter. Meanwhile, the same for Happiest Minds was witnessed at 5.5 percent.
5) Wockhardt, Emami, Ajanta Pharma, JSW Steel, JSW Energy, NOCIL, Hind Zinc and Aurobindo Pharma witnessed a substantial increase in their pledged promoter holdings in Q3. Wockhardt's pledged promoter holdings rose the most, 3.3 percent from 52.8 percent in Q2FY23 to 56.1 percent in Q3FY23. Emani also recorded a 3.2 percent rise in its pledged promoter holdings from 33.4 percent in the September quarter to 36.5 percent in the December quarter. Meanwhile, Ajanta Pharma, JSW Steel, and JSW Energy, each saw a 2-2.5 percent rise in their respective pledged holdings.
6) Motherson Sumi's released its entire pledged holdings in the December quarter from 19.2 percent in the September quarter.
7) Other companies in which pledged promoter holdings declined included Deepak Fertilisers, GMR Airports, Granules India and 360 One, among others. Deepak Fertilisers witnessed a 7.7 percent decline from 14.6 percent in Q2 to 6.8 percent in Q3. GMR also saw a 7.7 percent decline in pledged holdings from 74.9 percent in Q2 to 67.2 percent in Q3. Granules and 360 ONE witnessed a 6.6 percent and 6.5 percent decline in their respective pledged holdings in Q3.
8) Companies in the Nifty-50 with more than 5 percent of pledged promoter holdings: Adani Ports & SEZ (17.3 percent), Apollo Hospitals (16.4 percent), Asian Paints (7.6 percent), IndusInd Bank (45.5 percent) and JSW Steel (17.6 percent).
The report noted that it compares changes in pledged holdings between September 2022 and December 2022 quarters. Changes in pledged holdings after December 2022 have not been incorporated in this report, it clarified. The report is based on the latest BSE-500 constituents.
It is important to note 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.
What is the pledging of shares?
Shares are basically the assets of the company or a shareholder. And pledging is a way by which the promoters of any company take a loan against the held shares to meet these personal or business requirements including fulfillment of capital requirements, expansion of business, starting a new venture, and so on.