With markets expected to remain volatile, promoters and lenders exposed to the industrials and materials space can face brunt of the price erosion of the pledged shares.Illustration: Dominic Xavier/Rediff.com Promoters of India Inc continue to rely heavily on share pledging to raise debt for funding their core and non-core business activities. According to the data analysed from Capitaline, the promoters pledged more than Rs 1.2 trillion worth of shares in 2018-19, 60 per cent higher than the previous year’s tally. So far in 2019, more than Rs 16,000 crore worth of shares has been pledged by the promoters. The data analysis takes into account the value of shares reported by the listed companies to the exchange as part of their pledge creation disclosures.Industry observers say structured deals, involving loans against shares (LAS), have led to a spurt in share pledging. Domestic mutual funds (MFs) are active participants in such deals with their exposure ranging between Rs 25,000 crore and Rs 30,000 crore. Sources say such deals have come under the scanner of the Securities and Exchange Board of India (Sebi), which is engaging market players to assess the wider risks for the market. “While pledging is an easy and quick… Read full this story
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