High financing deals involving loan against shares to promoters of listed companies are now being examined by the government and market regulator SEBI, which is now discussing ways to avert a possible crisis.

After the Anil Ambani-led Reliance group complained to SEBI against fire-sale of shares in its companies by NBFCs, the lenders have informed the market regulator that they have no option but to offload promoter shares at the first sign of adverse news as many promoters have defaulted on their margin obligation and are not responding to their calls, sources close to the development told BusinessLine .

Latest available data from the BSE show that shares worth around ₹2 lakh crore have been pledged by promoters of listed companies with a handful of NBFCs. Lenders are allowed to finance around 50 per cent against the value of equity shares. But even as the benchmark indices stay at an elevated level, shares of most small- and mid-cap companies have witnessed more than 50 per cent erosion in value from their peak levels seen some time in mid-2018.

This has led many NBFCs to follow up with company promoters asking them to bring in additional margin, a call which has not been heeded by many. Add to this the funding by some of the large mutual fund houses to corporate entities without adequate collateral, and the pain becomes intense, sources said.

Companies that are part of the Anil Ambani group recently complained against Edelweiss and L&T group linked NBFCs for indulging in fire sale and “destroying” the market value of the group.

But details on the margin call made and whether these companies adhered to it are yet to emerge, sources said.

“Loan against shares, which is such a big issue now, is nothing new. But it has assumed a gargantuan proportion as the entire system ran blindfolded,” said Deven Choksey, founder promoter, KR Choksey Investment Advisors. “Since checks and balances were not applied earlier, the system definitely needs handholding now to ensure that there is no fire-sale of assets. The best thing to do is to bring such financing deals on the exchange platform, which are currently conducted under the radar,” he added.

Inflating the share price

Market experts say some promoters have been inflating the share price during a bull-run and then pledging the shares to avail loan against them.

The same promoters then buy shares again at a lower price during severe market crash or bear phase. Data show that promoters of 195 listed companies have pledged over 50 per cent of their holding. Some of them will never come back to free it from lenders.

Some of the companies, apart from ADAG, with high pledged shares by promoters include Sterlite Technologies, GMR Infrastructure, Apollo Hospitals, Reliance Power, JSW Energy, Coffee Day Enterprises, Dish TV India, Future Consumer, Indiabulls Real Estate, Max Financial Services, Indusind Bank, Asian Paints, JSWAdani and Zee group. However, not all these promoters have defaulted.

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