BackJSW Group repays ₹1,200 crore debt to release pledged shares
Sajjan Jindal-led group releases pledged promoter shares of JSW Steel and JSW Energy worth ₹2,500 crPromoters pledging shares with banks as collateral for loans is common practice in India
PremiumSajjan Jindal-led JSW Group on Tuesday said it has released ₹2,500 crore worth of pledged promoter shares of JSW Steel Ltd and JSW Energy Ltd by repaying loans worth ₹1,200 crore taken by promoter firms.
Two promoter entities of JSW Energy released 118.8 million pledged shares, which represent a 7.24% stake in the company.
For JSW Steel, promoter firms JSW Holdings Ltd, JSW Techno Projects Management Ltd, Sahyog Holdings Pvt. Ltd and Vividh Finvest Pvt. Ltd released 70.1 million encumbered shares of JSW Steel, or 2.9% of the paid-up equity capital of the company.
The latest reduction in promoter pledged shares follows a similar debt repayment by the JSW promoter group in September to release pledged shares.
In September, JSW Steel’s three promoter group companies released 50.7 million of its pledged shares of the company, representing about 2.09% of its share capital, repaying loans worth ₹1,148.59 crore.
As of 30 June, JSW Steel promoters pledged about half of its 42.27% holding in the company by pledging about 500 million shares. JSW Energy promoter firms also pledged more than half of its 75% holding in the firm.
Promoters pledging shares with banks as collateral for loans is common practice in India. According to a Kotak Institutional Equities analysis of pledged holdings of BSE-500 stocks, the percentage of pledged promoter (majority shareholder) holdings by value has come down in the June quarter in comparison to the preceding three months.
The percentage of pledged promoter holdings declined to 2.47% of total promoter holdings in the June quarter, from 2.83% in the March quarter. Outstanding promoter pledged shares were worth ₹1.73 trillion as of June 30, which is about 1.21% of the total BSE-500 Index’s market capitalization at the end of June.
The brokerage noted that pledging shares does not necessarily imply that a company or a promoter is under financial stress; lenders could have sought additional security in the form of promoter shares too.
However, there have also been cases in the recent past of promoters being forced to sell assets or exit their companies under financial duress because of high pledge ratios.
Recently, private equity firm KKR and other lenders enforced their pledges in CG Power and Industrial Solutions to take control of the company.
The Subhash Chandra-led Essel group is also facing pressure from lenders and recently sold a considerable stake in its flagship firm—Zee Entertainment Enterprises Ltd—to release promoter pledges.
Other promoter groups who have focused on repaying promoter level loans to reduce pledged shares include the promoters of Apollo Hospitals Group, who recently sold a 3.6% stake in their flagship company to pare debt and are in the process of selling their insurance JV Apollo Munich Health Insurance Co Ltd. Promoters of Emami group sold 20% stake in their flagship company, Emami Ltd, to bring down promoter debt and pledges.
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