Share pledge disclosures weigh on blue-chip stocks

Share pledge disclosures weigh on blue-chip stocks
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First Published: Sun, Mar 22 2009. 12 21 PM IST
Updated: Sun, Mar 22 2009. 12 21 PM IST
New Delhi: Shares of a dozen blue-chip firms, including Reliance Capital and Zee Entertainment, are being hammered on the National Stock Exchange ever since their promoters disclosed their share pledge details.
An analysis of over a dozen stocks included in the 50- share benchmark index Nifty shows that shares of these firms remained in the negative territory till the last trading session after being hit following the promoters’ disclosure of pledging shares with lenders.
Scrip of Anil Ambani Group firm Reliance Capital declined over 7% the day after the company disclosed that one of its promoters group firm AAA Enterprises had pledged over 4% of its stake in the company.
On Friday last week, Reliance Cap was down 27% at Rs313.05 compared with the Rs431 level on 13 February when the company disclosed the pledging.
Similarly, Zee Entertainment shares were trading down over 22% on 20 March compared to 10 February when its promoters disclosed pledging of nearly 12% of the company’s stake with lenders.
According to marketmen share pledging by promoters is not a new thing and they have been doing it for many years to raise funds. In wake of the Satyam scandal, the market regulator Sebi made it mandatory for every listed company to come out with their disclosures.
"Although share pledging is not a new phenomenon, but disclosures by promoters may have given a negative trigger to blue chip stocks and the overall bearish trend is making it difficult for them to climb back to earlier levels," a leading analyst from a leading brokerage firm said.
Two Tata group firms Tata Steel and Tata Power, promoters of which have pledged as much as 13.53% and 14.59%, respectively are also trading in the red since the disclosure of pledged shares.
Friday, Tata Power ended at Rs667.75, down 17% from 11 February when its pledged shares details were disclosed. Shares of Tata Steel have plunged over 11%.
Further, realty major Unitech’s shares were down over 10%, wind power major Suzlon Energy (down 19%), Sun Pharma (down 9%) and two other ADA group firms Reliance Communications and Reliance Infrastructure are down 7% and 9% each.
However, Mahindra and Mahindra, Tata Motors, Tata Communications and TCS have managed to rise after the initial negative response from investors and are now trading in the green compared to the day when their pledge shares details were disclosed.
On Friday, M&M shares settled up 13% over its close of 16 February (the share pledge announcement date), while Tata Motors gained 16%. Tata Comm and TCS were up 4.38% and 0.11%, respectively on the NSE.
According to data available on both the bourses, promoters of over 500 companies have pledged shares in the range of one per cent to nearly 86 per cent of their holdings in the respective companies with financial institutions and other lenders.
The companies have pledged their shares with public sector banks like the State Bank of India, IDBI, Union Bank of India, Oriental Bank of Commerce, Canara Bank, PNB, besides the private sector lenders ICICI Bank and HDFC among others.
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First Published: Sun, Mar 22 2009. 12 21 PM IST
More Topics: Shares | Pledge | Stocks | Corporate | Reliance |