Pledging of shares by promoters in companies listed on National Stock Exchange stands at a 7-year high as on 30th June 2016.
According to data from Prime Database, the percentage of promoter holding pledged went up from 15.57 per cent a year back to 16.00 per cent on June 30, 2016. In value terms too, promoters’ share pledging saw an increase of 11.29 per cent on a year-on-year basis with the value of pledged shares going up to Rs 1.98 lakh crore as on June 30, 2016 compared to 1.77 lakh crore as on June 30, 2015.
"High pledge levels are typically not considered a good sign by the investors as a downturn in the market price can lead to invocation and change in management", said managing director of Prime Database Pranav Haldea.
Surprisingly, there were as many as 31 companies in which the complete holding (100 per cent) of the promoters was under pledge as on June 30, 2016, namely AGC Networks, Arshiya, Bajaj Hindusthan Sugar, Bharati Defence & Infrastructure, Consolidated Construction Consortium, Diamond Power Infrastructure, DQ Entertainment (International), Eastern Silk Industries, Flexituff International, Gokaldas Exports, IL&FS Investment Managers, Ind-Swift Laboratories, IVRCL, JMT Auto, MSP Steel & Power, Paramount Communications, Parenteral Drugs (India), PSL, Raj Rayon Industries, Reliance Defence & Engineering, Rohit Ferro-Tech, S.A.L.Steel, SEL Manufacturing Co., Servalakshmi Paper, Spentex Industries, STI India, Subex, Sujana Metal Products, Tantia Constructions, Venus Remedies and Visa Steel.
Pledging of shares has also gone up because of companies being saddled with huge debt. Promoters are pledging shares to meet working capital requirement for companies as banks are refusing to lend.