Ahmedabad: Share pledging by Gujju promoters has shot up in the last year. Data shows that while value of pledged shares more than doubled in the last year, percentage of promoter holding pledged has also increased by almost 25%.
Promoters typically pledge their shares to raise funds for the same company, or for financing other projects. High levels of pledged shares are not seen as a good sign by investors as a downturn in market price can lead to invocation and change in management.
However, this does not seem to have desisted promoters of Gujarat-based companies from raising funds by pledging part of their holding, as there was a huge rise in shares pledged by many promoters in 2014-15.
powered and developed by Prime Database, the value of shares pledged by promoters of Gujarat-based NSE listed companies has increased from Rs16,000 crore at the end of March 2014 to nearly Rs36,000 crore in March 2015. As of March 2015, promoters of 48 out of 129 companies had pledged their shares, the same as in the previous year. Of these, promoters of 24 companies pledged their shares during the year.
The sharp rally in shares of many of the Gujarat-based companies is one of the reasons for the rise in value of pledged shares, but even otherwise the number of shares pledged by promoters has gone up.
"The percentage of promoter holding pledged has gone up from 32.66% a year ago to 39.12% on March 31, 2015," Pranav Haldea, managing director of Prime Database, told dna. The analysis shows that 100% holding of promoters of SAL Steel was under pledge as on March 31, 2015.
When the markets run up, as they did last year, promoters' pledged stakes are generally expected to come down as higher share prices, create enough comfort zones for lenders. However, this did not happen. Shares pledged by promoters increased in the case of 14 companies, which includes Sadbhav Engineering (0 to 30% during the year), Atul (0 to 8%) and Aarvee Denims (0 to 2%).
On the other hand, pledged shareholding declined in 26 companies. These include Lyka Labs (82 to 39%), Nandan Denim (74 to 38%), 20Microns (39 to 14%), Sumeet Industries (44 to 26%), Kiri Industries (45 to 30%), Ganesh Housing (92 to 80%), Sintex (58 to 52%), among others. In two companies, pledged shares were brought down to zero during the year. These companies are Ashima and Ratnamani Metals.
Interestingly, surge in value of shares pledged by promoters of Gujarat-based companies is much higher than the overal rise for promoters of all NSE-listed companies, which went up by 28% to Rs1.94 lakh crore during the year.
In the case of ten Gujarat-based companies, 90% or more of promoter shareholding is pledged, as of March 2015. The list includes ABG Shipyard, Pipavav Defence, Essar Ports, Essar Shipping, Jaihind Projects, Pradip Overseas, Shah Alloys, SAL Steel, Suzlon Energy and Shri Aster Silicates.
Essar Oil, Bodal Chemicals, Ganesh Housing, Golden Tobacco, Sterling Biotech, Rainbow Papers and Sintex Industries, Sanghvi Forging, are some of the companies in which more than 50% of the promoter shareholding was pledged.
The data shows that shares worth Rs16,000 crore of three Adani Group entities were pledged as of March 2015, nearly half of the entire pledged promoter shareholding of Gujarat-based NSE-listed companies.