Despite the stock markets gaining 15 per cent year-to-date in 2017 and trading close to their lifetime highs, pledging of shares by promoters has come down only marginally in the March 2017 quarter compared to the December quarter.
Typically, a rise in market valuations gives promoters headroom to lower their pledged shares, given that the value of their holdings too would have risen. But that trend seems not to have played out this time.
According to data provided by Prime Database, total promoter shares pledged, in the universe of 1,557 companies listed on the NSE, came down to an average 15.16 per cent in the March quarter compared to an average 15.52 per cent in the December quarter, down 36 basis points.
If the companies whose promoters have pledged no shares are excluded, the ratio was down only 86 basis points sequentially to an average 47.14 per cent in the fourth quarter of FY17.
The value of pledged shares jumped 14 per cent quarter-on-quarter in Q4, but the same as a percentage of market capitalisation was down by a marginal 28 basis points. This is thanks to the 20 per cent gains notched up by Nifty mid- and small-cap indices, more than the Nifty’s 12 per cent.
“The extent of pledging is less in larger companies, say those in the Nifty, compared to smaller companies. Also, shares of some sectors did not not participate in the rally. Moreover, promoters may have raised more money on their improved valuations rather than by releasing pledged shares,” added Pranav Haldea, MD, Prime Database.Patterns to pledging
According to Prime Database, there were 33 companies in which the complete holding (100 per cent) of the promoters had been pledged as on March 31, 2017. There were 80 companies in which more than 90 per cent of the promoters’ shareholding was pledged, and 205 companies in which more than 50 per cent of the promoters’ shareholding was pledged.
By value of pledged shares, the top 10 companies were Adani Ports & SEZ, TCS, Zee Entertainment Enterprises, JSW Steel, Asian Paints, Emami, Reliance Power, Reliance Infrastructure, GMR Infrastructure and Fortis Healthcare.Biggest ‘movers’
The top three companies in which pledging of promotors’ shareholding moved from zero per cent to a high percentage during the period from December 2016 to March 2017 were Advanced Enzyme Technologies (0 to 25 per cent), Stampede Capital (0 to 18 per cent), DCM (0 to 16 per cent) and Talwalkars Better Value Fitness (0 to 12 per cent), There were19 companies in which pledged shares were brought down to nil. This list includes Bannari Amman Sugars (from 83 per cent), PC Jeweller (from 71 per cent) and Sharon Bio-Medicine (from 38 per cent).