Poser on share pledging
Pressure on promoters to reveal details.
Our Bureau
Mumbai, Jan. 20 In the aftermath of the Satyam saga, the pressure on the
company's promoters to reveal details of the shares they may have pledged to
lenders is mounting.
SEBI's primary markets advisory committee, which met on Monday, is believed to
have agreed on making it mandatory for promoters to reveal to the stock
exchanges details about shares (of their own companies) they may have pledged.
Ugly heads
The Orchid Chemicals and Satyam incidents have brought to light the flipside of
promoter pledging. In the case of Orchid Chemicals and Pharmaceuticals Ltd,
Religare Enterprises sold shares Mr K. Raghavendra Rao had pledged with it in
April 2008.
Then came the Satyam episode where some lenders sold all the shares pledged
with them by Mr B. Ramalinga Raju, the founder of Satyam Computer Services, who
on January 7 confessed to cooking the books of the company to the tune of Rs
7,136 crore.
After every bull run, stories of excesses emerge, said Mr Harjit Singh Sethi,
CEO of Almondz Global. In a declining market, it presents a danger, especially
when certain sectors are downgraded, when asset prices fall and it becomes
difficult for promoters to service debts, he said.
To a great extent it reflects a promoter's dire need and desperation if he has
pledged his shares in the current markets as he would have to pledge huge
amounts of shares against loans, said an analyst.
If the regulator makes it mandatory for promoters to reveal detail about their
pledged shares, everybody will be on the same footing, said Mr Gagan Banga,
Director of Indiabulls Finance.
While there is not much public data regarding companies and their promoters
that have pledged their shares to NBFCs and banks, some companies have chosen
to make the data public.
Among them are Shree Renuka Sugars, where 1.6 crore shares have been pledged to
IDBI Trustee. The shares constitute 5.93 per cent of the paid-up capital.
Parsvnath Developers have pledged 10.27 per cent of their equity capital.
Among the onshore players that lend to promoters are Indiabulls Finance, India
Infoline, IDBI Trustee, Cholamandalam DBS Finance Ltd, GE Money Financial
Services India Ltd, Citi Financials India Ltd, Standard Chartered Investments
and Loans India Ltd, NBFC arms of brokerages and banks such as Edelweiss
Capital Ltd, India Infoline Ltd, ICICI Bank Ltd, Kotak Mahindra Bank Ltd, DSP
Merrill Lynch Ltd, Religare Enterprises Ltd, JM Financial Ltd and Motilal Oswal
Securities Ltd.
"We typically lend to companies against pledging of promoters' shares, while
the lending to promoters individually is of a very insignificant amount," said
Mr Banga of Indiabulls.
"Our total lending to companies against pledged shares is around Rs 400 crore
to around eight companies, and it is about four per cent of our total loan
book."
While the overall exposure banks can have in capital market is not more than 40
per cent of the banks' previous year's net worth, for NBFC's, single party
exposure is limited to 15 per cent of its net funds.
FIIs' priority
It has become a priority for FIIs to know the quantum of shares pledged by a
company's promoters before they invest, said Mr Saurabh Mukherjea, Head of
Equities at Noble Group
http://www.thehindubusinessline.com/2009/01/21/stories/2009012150681000.htm
ekamber
--~--~---------~--~----~------------~-------~--~----~
You received this message because you are subscribed to the Google Groups
""GLOBAL SPECULATORS"" group.
To post to this group, send email to [email protected]
To unsubscribe from this group, send email to
[email protected]
For more options, visit this group at
http://groups.google.com/group/globalspeculators?hl=en
-~----------~----~----~----~------~----~------~--~---
