Pledged promoter holdings fall sharply in Q1; 5 companies had over 90% of holdings pledged Kotak Institutional Equities, in its report, stated that a reconstitution of BSE 500 index can be attributed to the fall in pledged holdings.

Pledged holdings by promoters have seen a ‘sharp’ dip of 0.6 percentage points during the June quarter as compared to March quarter, according to Kotak Institutional Equities. The document analysed pledged promoter holdings of BSE 500 stocks.“The percentage of pledged promoter holdings reduced to 6.8% in the June quarter from 7.4% in March,” the report stated.

So why has there been a dip in this number? Experts from the firm attribute this to change in constituents of the BSE 500 index. “Many companies with higher constituent of promoter's pledged holding have been excluded from BSE 500 in the June quarter,” they said. Overall, the pledged shares were worth Rs 1.82 lakh crore, making it around 1.37 percent of total BSE 500 index’s market capitalisation in June 2018.The institutional brokerage firm observed that promoters of 119 firms pledged their holdings against 128 in the previous quarter. In that, five firms had more than 90 percent of their promoter holdings pledged.

Highlights from the June 2018 quarter (BSE 500 companies):

• Companies whose promoters pledged more than 95% of their holdings: CG Power and Industrial, Reliance Naval and Engineering, Suzlon Energy and IL&FS Transportation Networks.

• Highest increase in pledged promoter holdings: Indiabulls Real Estate, Granules India, Laurus Labs, Adani Transmission and Kwality.

• Companies in which pledged promoter holdings declined: KPIT Technologies, Advance Enzyme, Apollo Tyres, Century Textiles and Bombay Burmah.

• Fresh promoter pledges: Indiabulls Real Estate, Laurus Labs and Radico Khaitan.

• Promoters who revoked their entire pledged holdings: None.

• Companies in the Nifty-50 with more than 5% of pledged promoter holdings: Adani Ports & SEZ (38.3%), Asian Paints (12.5%), Indiabulls Housing Finance (17.9%), M&M (5.8%) and Zee Entertainment (52.1%).

The brokerage house has highlighted 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.

First Published on Aug 2, 2018 03:35 pm moneycontrolnews