High promoter pledge under focus

The market has turned wary of companies with high promoter pledging. Given the trend, it is critical to keep a tab on stocks which see large changes in share pledging. According to data compiled by Edelweiss Research, Mphasis, Torrent Power, and Strides Pharma saw the highest quarter-on-quarter increase in promoter pledging during the three months ended September 2019. On the other hand, Adani Transmission, Granules India, and Triveni Turbine saw the biggest reduction. According to the brokerage, Max India, Max Financial, JSW Steel, and Jindal Steel are some of the stocks that have seen consistent incremental pledging activity in the past five quarters. “Promoter pledge disclosures continued to remain under the radar on the back of weak market sentiment with stocks like CG Power, Zee Entertainment, and YES Bank being in the news for pledges in the company,” says a note by Edelweiss. During the quarter, the Securities and Exchange Board of India (Sebi) also tightened disclosure norms about share pledging. Under the new norms, companies have to furnish detailed reasons for any kind of encumbrance on shares belonging to promoters. Among the details companies have to furnish are the end-use of money and security cover provided. Also, recently stock exchanges directed brokers to impose a higher margin on their clients both in the cash and the derivatives segments when it comes to stocks where total promoter pledging exceeds 25 per cent of the total equity.