What's at stake for investors when promoters pledge the family silver

In the aftermath of Adani pledging their entire stake in ACC and Ambuja, a look at other top promoter pledges

Published: Sep 21, 2022 04:59:03 PM IST

Updated: Sep 21, 2022 07:00:08 PM IST

Investors usually stay away from companies with high promoter pledges

On September 21, almost as soon as the Adani Group completed the acquisition of Holcim’s India units, came news that the new promoters had pledged their entire shareholding in the acquired companies.

An exchange filing by Deutsche Bank AG’s Hong Kong branch said the shares had been pledged “for the benefit of certain lenders and other finance parties”. At current market prices, the pledge amounts to a total of Rs 93,780 crore.

Promoters putting up their stake for sale has often had a negative connotation for investors. They fear that if loans are not paid back the lenders may sell securities in the open market leading to a free fall in prices. As a result, investors usually stay away from companies with high promoter pledges.

That hasn’t stopped large companies from pledging almost their entire stake in to lenders. Case in point: Two companies owned by Anil Aggarwal–Vedanta and Hindustan Zinc that have a combined Rs 1,38,123 crore pledged as per market prices on September 21.

According to data from the NSE, there are 24 companies that have 100 percent of promoter holdings pledged. These include Thyrocare Technologies and Future Supply Chain. Another 48 have over 90 percent of promoter holding pledged.

Other large companies that have significant pledged holdings are CG Power (acquired by Tube Investments of the Muruguppa Group) and Analjit Singh’s Max Financial.

Bringing up the rear are two names that are often associated with pledged holdings include Suzlon and Spicejet but the market value of the pledges is small: Rs 1,094 crore and Rs 664 crore respectively.