Promoters release pledged shares as stock market rallies
It was not just the large companies that reduced promoter pledges; even mid- and small-cap firms took advantage of the stocks rally to cut pledged shares.
The number of companies with pledged promoter shares fell in the June quarter, continuing their more than year-long stretch of deleveraging, as stock prices nearly doubled from last year’s lows.
Of the Nifty 500 index members, the number of companies that had pledged promoter shares declined to 86 at the end of the June quarter from 93 in the March quarter, Mint research showed. In comparison, there were 99 companies with pledged promoter shares at the end of June last year.
It was not just the large companies that reduced promoter pledges; even mid- and small-cap firms took advantage of the stocks rally to cut pledged shares. Among midcap stocks, promoter pledging reduced to 25 in the June quarter from 27 in the March quarter and 28 a year ago. Among small-cap stocks, that number dropped to 128 in the June quarter from 136 at the end of the preceding three months. It was 154 at the end of June last year.
Soaring stock prices increased the value of promoters’ shareholdings, reducing the number of shares promoters needed to put up as collateral, analysts said. The Nifty 500 index gained 87% since May 1 last year.
“We believe the current pledge release by promoters is a combination of a rise in share prices, along with the deleveraging exercise. India Inc. has started keeping balance sheets lighter, and most firms have refrained from any major capex. Although announcements keep on coming, not much has started on the ground,” said Vinit Bolinjkar, head of research, Ventura Securities.
In the June quarter, benchmark indices Sensex and Nifty advanced 6% and 7%, respectively. BSE MidCap and SmallCap indices rose 3.6% and 7% in the June quarter. They have gained 59% and 91% since March 2020, respectively.
Adani Group firms were among the most active in reducing promoter pledges. Adani Green Energy Ltd has seen its pledged promoter shareholding fall for the seventh straight quarter, while Adani Enterprises, Adani Power Ltd and Adani Transmission have seen the same drop for the fifth consecutive quarter and Adani Ports for the second straight quarter.
Max Financial, Future Retail, Kalpataru Power, Dish TV, Jindal Steel and Power, Deepak Fertilizer, Emami, Strides Pharma, JSW Energy, NCC, Apollo Hospitals, JSW Steel, Asian Paints, Solara Active, Sun Pharma Industries, Apollo Tyres, Motherson Sumi, and Crompton Greaves Consumers also saw a substantial decline in their pledged shares.
Among the Nifty 500 Index members, GMR Infrastructure, Indusind Bank, SpiceJet, Johnson Controls and Ramco Cement saw an increase in share pledging by their promoters. Around nine firms saw promoters pledge more than half their stakes, while 20 firms saw promoters pledge between 20% and 49% of their stakes.