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While the 13 per cent rally from December lows pushed BSE benchmark Sensex beyond the 29,000 mark in Thursday’s trade, it also made seven stocks with promoters’ stakes fully pledged rally anywhere between 40 per cent and 110 per cent, raising a few eyebrows.
As of date, promoters of the 3,091 BSE-listed companies have shares worth Rs 2,42,913 crore pledged with their lenders. Out of them, in the case of 58 companies promoters have pledged their entire holdings (99.5-100 per cent).
For instance, shares of Arshiya, a logistics stock, have rallied 111 per cent till Wednesday from Rs 27.90 on December 26.
Promoters of the company have pledged their entire holding. The pledged shares (or total promoter stake) accounted for 74.99 per cent stake in the company as of December 31. As per BSE data, the value of these pledged shares was Rs 681.64 crore as of December 31.
Pradip Overseas, a textile firm, has seen its shares soar 89 per cent since December 26, even as promoter stake in the company, at about 52.99 per cent, stood fully pledged.
Shares of STI India, which is promoted by Bombay Rayon Fashions, have rallied 66 per cent in just two months. The promoters of the company have fully pledged their shares with their lenders.
Among others, shares of Panyam Cement, SAL Steel, Paramount Communications and Visa Steel have climbed 63 per cent, 51 per cent, 44 per cent and 42 per cent, respectively, when entire promoter holdings in these companies remain pledged.
While pledging by promoters is not an uncommon practice in India, extreme levels of share pledging show either the business is under stressed or it is not well managed.
Experts say some of firms with high promoter pledges even have corporate governance issues. Balance sheets of these companies usually stay under pressure and, hence, they find it difficult to raise further funds.
Data showed out of the 58 stocks, 19 have jumped over 20 per cent since December 26, 2016, when the benchmark indices hit its 52-week low.