Promoters of 440 companies pledged shares worth 10 dollar Billion
Delhi: The decision by India's markets watchdog to tighten the disclosure norms
for the promoters of listed companies after the Rs.73-billion ($1.5-billion)
Satyam Computer Services scam appears to have made an impact.Promoters of as
many as 440 companies have disclosed over the past two months that they had
pledged shares worth a whopping Rs.50,474 crore (Rs.504.74 billion, or over $10
billion), says a new study.
Promoters of blue-chip companies belonging to groups such as the Tatas,
Suzlon, Ispat and Jaiprakash pledged their shares with lenders after the new
norms of the Securities and Exchange Board of India came into effect in
January, says the study by leading brokerage SMC Capital.In a sign that also
indicates how hard it has been to find cash for new projects, four Tata group
firms pledged their shares, with Tata Teleservices Maharashtra placing as much
as 49.7 percent of its equity, as per the study made available to IANS.
"A lot of these pledges happened during the bull run," said Jagannadham
Thunuguntla, equity head with SMC Capital. "Promoters sought to take
advantage of overpriced shares to raise fresh capital."The promoters of
Ispat pledged 29.98 percent of their equity, followed by 25.85 percent by
Suzlon Energy, 13.54 percent by Tata Steel and 11.14 by Tata Consultancy
Services, the study said.
In terms of the money raised, Tata Consultancy Services topped the list with
Rs.5,485 crore (Rs.54.85 billion), followed by Tata Power with Rs.2,506 crore
The promoters of United Spirits, led by Vijay Mallya - who is facing a tough
time due to losses being suffered by Kingfisher Airlines - came in next with
Rs.2,241 core (Rs.22.41 billion), followed by Tata Teleservices Maharashtra
with Rs.2,178 crore (Rs.21.78 billion).The study also showed that textiles was
the top sector in which promoters of 44 companies pledged their shares,
followed by 43 companies in metals and mining, 39 companies in technology, 31
companies in construction and realty, and 27 companies in pharma.Lenders
normally give only about 50 percent of the pledged shares' value as loan
because of the risky nature of the collateral. The bulk of the shares were
pledged when the Indian stocks were ruling far higher than they are now.
The markets watchdog SEBI had tightened the disclosure norms for promoters on
Jan 21 after it found some lapses during its probe into the Satyam Computer
SEBI chairman C.B. Bhave had said the Satyam scandal - in which its founder and
former chairman B. Ramalinga Raju admitted to inflating the company's cash
balances and profits over several years - would trigger a long-term system
"Whenever any such scandal happens, we need to look for long-term systemic
improvements. Sometimes one can come up with quick solutions, like the one on
disclosure of shares," Bhave had said.