Changes in Promoter Pledging in June’20

Which promoters increased/decreased pledged shares in June’20?

Introduction

In this blog, we will take a look at what promoter pledging is and which are the companies that have increased/decreased promoter stake in June’20.

What is promoter pledging?

Promoter pledging is when promoters keep their shares as collateral and raise funds to meet the working capital , to finance any mergers or acquisition or for personal needs. As the value of shares fluctuate , the value of collateral also fluctuates, however the promoter has to ensure that the value of shares is at a certain level. If it falls below this level, promoter has to compensate for the shortfall in value.

Promoter pledging is looked at as a bad sign of corporate governance. This is because in order to maintain the share price at a certain level, promoters tend to manipulate the earnings. Also, if the pledged shares are sold in market, the promoter might lose control over the company. This does not augur well for the retail shareholders. Hence, one should avoid companies having pledged promoter shares.

Which companies have reduced promoter pledging?

Fall in promoter pledging is considered as a positive sign. Given the current macro-economic situation where interest rates have reached the lowest and equity markets are chasing new highs since the lows in March’20, promoters prefer to raise funds through debt. Hence, there is a reduction in pledged shares of many companies.

Let us take a look at the companies that have reduced their promoter pledging as of June’20.

Which companies have increased promoter pledging?

Few companies have still seen rise in promoter pledging which is a red flag according to corporate governance rules.

Let us take a look at the companies that have increased promote pledging as of June’20