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Yesterday it was the turn of GTL. Today it was Orchid Chemicals and S Kumar's Nationwide.
Both the stocks were battered on the bourses by 10.9 per cent and 11.35 per cent respectively on Tuesday on fears that pledged shares were being sold in the market. The two scrips closed the day at Rs 231.9 and Rs 51.2 respectively.
The Managing Directors of both companies clarified on television that the shares pledged by promoters had not been sold. The top management of the three companies have been blaming speculators for having brought stock prices down, with GTL even considering approaching the stock market regulator, SEBI.
Experts said that the market is overreacting to the issue of pledging. Low deliverable volumes amid sharp fall in prices indicate high level of speculative activity, said marketmen. Besides, speculators also took advantage as these stocks are in F&O segment, where circuit breaker cannot be applied, they added.
“Pledging of shares is not a derogatory act especially if the funds thus raised are used to expand the business,” said Mr Gopal Agarwal, CIO Mirae Asset Global Investments (India). “First generation entrepreneurs usually do it as a means of raising funds as they do not have access to other means of finance every time they need money.”
Experts said that investors are aware of the fact that promoters have pledged shares whenever they take a position in any stock and there is no scope for SEBI to curb pledging of shares as it is done transparently through a stock exchange notification.
“Though SEBI has mandated the cap for promoter holding at 75 per cent, there is no floor,” said Mr Kishor Ostwal, CMD-CNI Research. “If the floor is decided at 25 per cent with a condition that it cannot be pledged, Satyam would not have happened as the floor would take care of the other investors and also maintain the integrity of the promoter and the company.”
This is because there are 1,600-odd companies that have been suspended by BSE since 1992 for violation of listing agreement and the common thread among them is that promoter holding is less than or equal to one per cent while other investors have nowhere to go.
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