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Quick Comment: Per the SEBI regulations initiated in
Mar-09, promoters/founders of companies are required
to disclose the amount of stock they have pledged.
The following are our observations on the
disclosures made during the latest quarter:
What’s at Stake? During this quarter, 772 companies
disclosed pledges on their holdings. As at the end of
Sep-11, the total value of pledged stocks was
US$24.5bn versus US$34.3bn in Jun-11 (down 29%
QoQ). The fall was further magnified by the recent fall in
currency. In rupee terms, the total pledged value stood
at Rs1.2trn vs. Rs1.5trn in Jun-11 quarter (down 22%
QoQ). This pledged value as a % of the market cap of
stocks of these companies has fallen to its lowest level
since Mar-09 – at 9.8% (down 20bps QoQ). This
pledged value as a % of India’s market cap fell for the
three successive quarters to its lowest level since
Mar-09 – at 2%. Marked to market, as per previous day’s
close, the pledged value of shares was at US$23.9bn vs.
US$24.5bn at the end of the Sep quarter without
accounting for any subsequent changes that may have
happened to the number of shares pledged.
Assuming 50% margin, the bank credit to these
promoters at US$12.3 billion is 1.3% of outstanding
bank credit.
At the sector level, Technology saw the biggest fall in
share of pledging while Financials witnessed a pickup in
share during the quarter (see Exhibit 4).
As a percent of total pledges (in value terms), Consumer
Discretionary followed by Materials had the biggest
pledging by promoters. As a percent of market cap,
pledging is highest for Utilities and Financials. Materials
followed by Consumer Discretionary continue to have
the most widespread pledging by promoters.
Forty-five companies from our Morgan Stanley coverage
universe have reported pledges (totaling US$10.9bn). Among
Sensex constituents, ten companies have reported pledges of
US$3bn.
Out of the 772 companies that reported promoter pledging in
Sep-11, 48 have revoked their pledges on shares and are out
of the list. An additional 63 companies have reported promoter
pledging during the quarter.
Notably, 176 companies have reported lower pledging vs. the
previous quarter while 169 companies have increased
pledging vs. the previous quarter. 379 companies have kept
their level of pledging (in %) unchanged. (See Exhibit 9 for the
biggest changes).
Please note that certain sectors like Utilities have higher
promoter pledging due to the requirement of providing
collateral security to banks and financial institutions for availing
loans.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Quick Comment: Per the SEBI regulations initiated in
Mar-09, promoters/founders of companies are required
to disclose the amount of stock they have pledged.
The following are our observations on the
disclosures made during the latest quarter:
What’s at Stake? During this quarter, 772 companies
disclosed pledges on their holdings. As at the end of
Sep-11, the total value of pledged stocks was
US$24.5bn versus US$34.3bn in Jun-11 (down 29%
QoQ). The fall was further magnified by the recent fall in
currency. In rupee terms, the total pledged value stood
at Rs1.2trn vs. Rs1.5trn in Jun-11 quarter (down 22%
QoQ). This pledged value as a % of the market cap of
stocks of these companies has fallen to its lowest level
since Mar-09 – at 9.8% (down 20bps QoQ). This
pledged value as a % of India’s market cap fell for the
three successive quarters to its lowest level since
Mar-09 – at 2%. Marked to market, as per previous day’s
close, the pledged value of shares was at US$23.9bn vs.
US$24.5bn at the end of the Sep quarter without
accounting for any subsequent changes that may have
happened to the number of shares pledged.
Assuming 50% margin, the bank credit to these
promoters at US$12.3 billion is 1.3% of outstanding
bank credit.
At the sector level, Technology saw the biggest fall in
share of pledging while Financials witnessed a pickup in
share during the quarter (see Exhibit 4).
As a percent of total pledges (in value terms), Consumer
Discretionary followed by Materials had the biggest
pledging by promoters. As a percent of market cap,
pledging is highest for Utilities and Financials. Materials
followed by Consumer Discretionary continue to have
the most widespread pledging by promoters.
Forty-five companies from our Morgan Stanley coverage
universe have reported pledges (totaling US$10.9bn). Among
Sensex constituents, ten companies have reported pledges of
US$3bn.
Out of the 772 companies that reported promoter pledging in
Sep-11, 48 have revoked their pledges on shares and are out
of the list. An additional 63 companies have reported promoter
pledging during the quarter.
Notably, 176 companies have reported lower pledging vs. the
previous quarter while 169 companies have increased
pledging vs. the previous quarter. 379 companies have kept
their level of pledging (in %) unchanged. (See Exhibit 9 for the
biggest changes).
Please note that certain sectors like Utilities have higher
promoter pledging due to the requirement of providing
collateral security to banks and financial institutions for availing
loans.
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