Pledging of shares by promoters of top 500 Indian companies has declined to the lowest in nearly five quarters.
Better market conditions and more promoters revoking the pledged shares to prevent overhang on the share prices seem to have helped the cause.
An analysis by DNA on promoter shareholding pattern for BSE 500 companies reveals that the aggregate number of shares pledged as percentage of those held by promoters has decreased to 10.8% in the December quarter from 11.1% in the previous quarter and 10.9% during the same quarter last fiscal.
Of the 402 companies that have declared their December shareholding patterns, as many as 135 had a part of the promoter stake pledged.
Dinesh Thakkar, chairman and managing director, Angel Broking, said that with the markets having appreciated substantially last quarter, the number of shares pledged — which is indirectly related to the share price — has seen a fall. “As the share price rises, the amount of shares required to be kept as pledge reduces.”
As against the previous few quarters where the number of companies creating additional pledge were more than those reducing pledge, the December quarter saw 70 companies revoking part of their pledged shares while only 35 companies created more pledge.
“The other reason for pledge reduction could be that over last few quarters, it is being seen that promoters are intentionally trying to de-leverage by selling non core assets which in turn reduces loan burden and pledge”, said Rikesh Parikh, vice-president, markets strategy and equities at Motilal Oswal Securities.
The promoters of TV18 Broadcast, Geodesic, Uflex and Jain irrigation reduced their pledge the most by 66.96%, 46.21%, 40.62% and 16.39%, respectively.
However there are still some companies which still have high level of promoter pledging.
While 35 of them have reported more than half of promoter holding as pledged, there are 9 companies where more than 90% of promoter holding was pledged till the end of December quarter.
The companies with highest promoter pledging include Gujarat Pipavav (100% promoter stake pledged), United Spirits (97.93%), Suzlon Energy (97.7%), Pipavav Defence (95.5%) and Alok Industries (95.23%).
Hindustan Construction and Tata Steel saw 83% and 62.39% increase in promter pledging.
Some of the high promoter pledging may be related to business related collateral requirements rather than for personal purposes, say experts.