The value of pledged shares jumped 27 per cent for the quarter ending March 2012 (q-o-q).
The number of companies in which promoters pledged their stake also increased marginally. According to Morgan Stanley estimate, the value stood at Rs 1.3 lakh crore.
At the end of the March quarter, 808 companies disclosed pledges on their holdings. Out of this, promoters of 258 companies have pledged more than 50 per cent of their holdings. There were 794 companies that reported pledges in the December 2011 quarter.
Most technology firms saw their promoters revoking the pledging of shares even as financials and healthcare companies saw higher instances of pledging during the quarter.
The value of shares pledged by the technology sector as a percentage of market capitalisation stood at 4.6 per cent, while the value with respect to promoter holding was 6.3 per cent, the report added.
Of the companies that reported pledging in December 2011, 49 have revoked the pledging completely. However, 63 additional companies have reported fresh pledging by promoters during the March 2012 quarter.
During the March quarter, 62 promoters increased their pledging by more than 25 per cent, while 54 promoters brought it down by 25 per cent and more.
According to SEBI regulations (in 2009), promoters/founders of companies are required to disclose the amount of stock they have pledged.
There are a number of risks associated with pledging of shares. In case of a default, a lender can sell the shares in the open market to recover dues. This could result in a fall in stock price and erosion of market capitalisation. Promoters also run the risk of losing management control if a big chunk of their holding is pledged.
On an average, 8-10 per cent of the promoter’s holding has been pledged during September 2009-March 2012, said an ICICI report on pledged shares.
From September 2009 to December 2010, the BSE 500 index constantly moved up, so impact of the pledging was not felt much. This was mainly because the value of shares did not see much erosion in value.
However, except for the recent quarter ended March 2012, the previous four quarters saw the BSE 500 index correcting about 25 per cent resulting in an erosion of market capitalisation of stocks and value of shares pledged for securing loans, added the ICICI report.
In such a scenario, companies that have taken loans against shares have to provide further margin in cash or pledge more securities to maintain the margin requirement.
priya.s@thehindu.co.in