As banks put cap on lending, promoters take to share pledges

MUMBAI:At a time when banks are reluctant to lend to stressed sectors amid rising defaults, share pledging by corporates for fund-raising has surged to a seven-year high.

As of June 30, 2016, the value of pledged shares across National Stock Exchange-listed companies rose to ₹1.98 lakh crore, from ₹1.77 lakh crore in the same period last year. It further rose to ₹2.08 lakh crore as on August 11, according to PRIME Database.

Shares are typically pledged by promoters as collateral to raise funds for businesses, and is done to as an alternate measure to generate money.

In percentage terms, promoter holding pledged across NSE-listed companies went up to 16% as of June 30, 2016, from 15.57% a year ago. As on August 11, it had further risen to 16.21%.

The rise in share prices over the last several months could be a key reason behind the increased shares pledging, according to Pranav Haldea, MD, PRIME Database. “As on June 30, shares were pledged in a 509 of 1,517 listed firms (It further rose to 522 companies on August 11), up from 496 firms a year back,” he said.

There were 31 companies, in which 100% promoter holding was pledged. These included IVRCL, JMT Auto, DQ Entertainment, Gokaldas Exports, AGC Networks, IL&FS Investment Managers, IVRCL, Reliance Defence and Engineering, Visa Steel, among others.

By value of pledged shares, Tata Consultancy Services led the list, with shares worth ₹10,708 crore pledged. As a percentage of total promoter holding, however, it was only 2.90%. It was followed by Adani Ports (pledged shares worth ₹9,514 crore or 39.18%), Cairn India (₹9,072 crore or 57.49% worth pledged shares), Zee Entertainment (₹7,310 crore or 38.71% worth shares pledged) and JSW Steel (pledged shares worth ₹6,940 crore or 47.26%).