Monday, September 10, 2012

>INDIA STRATEGY:Tracking Promoter Pledging: What’s at Stake?

Quick Comment: As per the SEBI regulations initiated in March 2009, promoters/founders of companies are required to disclose the amount of stock they have pledged.

Key highlights from the latest quarterly disclosures:
Pledges slightly off March 2012 lows: In the quarter ending this June, 767 companies disclosed pledges on their holdings. The pledged value as a percentage of the market cap of these companies is marginally above its March 2012 lows – at 9.8% (up 11bps QoQ). Its share in India’s market cap increased a tad from 2.05% in March 2012 to 2.08% in June 2012.

Value of pledges falls: As at the end of June 2012, the total value of pledged stocks was US$23bn, down 8% QoQ. In rupee terms, the total pledged value stood at Rs1.28trn, up 1% QoQ. Marked to market, as per the previous day’s close, the pledged value of shares was ~ US$22bn, down 9% QoQ without accounting for any subsequent changes that may have happened to the number of shares pledged. In rupee terms marked to market, the pledged value of shares was ~Rs1.27trn, down 0.5% QoQ.

Assuming a 50% margin, the bank credit to these promoters at US$11.5 billion is 2.7% of outstanding bank credit.

During the quarter, Utilities saw the largest fall in share of pledging while Healthcare witnessed a pick-up. At the end of the quarter, Consumer Discretionary followed by Materials have the biggest pledging by promoters in value as well the most widespread promoter pledging. Separately, as a percentage of market cap, pledging is highest for Financials and Energy, while as a percentage of promoter holding, the percentage of pledging is highest for Energy and lowest for Technology.

To read report in detail: INDIA STRATEGY