The value of pledged holdings stood at Rs 2.12 trillion for the quarter ended September 2018 compared to Rs 2.38 trillion at the end of the preceding quarter. The fall in the value of pledged shares was largely on account of the weakness in stock prices. High promoter pledging has become a pet peeve for investors at a time when liquidity situation is precarious due to the risk aversion among market lenders following the default by IL&FS. “The quarter that went by has brought in lot of systemic liquidity related concerns which have severely dented the market sentiment. The cascading impact of the events on stock prices and subsequently on promoter pledge holdings tends to be quite severe,” says a note by Edelweiss Securities.
“Companies where pledges are high and market sentiment have dragged the share prices down are bound to witness higher volatility,” the note adds. Among the prominent companies where promoter pledging increased during the September quarter are Zee Entertainment, Dish TV and Reliance Infrastructure. Meanwhile, companies where promoter holding pledged with lenders is in excess of 90 per cent include Bajaj Hindusthan (promoter pledging: 100%), Reliance Naval (100%), CG Power & Industrial (100%), IL&FS Transport (98.23%) and Sterlite Technologies (96.68%). Analysts at Edelweiss say the high share pledging is not only the risk for promoters but also to non-banking finance companies (NBFCs) that lend money with shares as collateral. “It (high share pledging) has put the entire NBFC space on the edge of the sword as short term liquidity has come under severe pressure,” Edelweiss analysts led by Yogesh Radke said in a note.