Is it good to invest in stocks where the Promoters are pledging their holding ?
Generally, the Founders or Promoters of the public listed company have to mortgage their holding to the banks or some other companies due to the Purpose of their Business or Personal reasons.
During the Q4FY19 – the January – March period, the Pledging percentage of Promoters holding have risen significantly listed in the BSE 500 (Bombay Stock Exchange). The Reliance Capital and Reliance Infra were increased their pledging up to 100 percent of their Holding. Already, the RCOM(Reliance Communication) has pledged its entire stake to debt crisis and now it is in bankruptcy process.
The listed media company Dish TV had also pledged up to 95 percent of Promoters Holding. The Promoters of Eveready Industries and Zee Entertainment have almost pledged more than 50 percent of their holding. The Pharmaceutical Giant Sun Pharma had too pledged nearly 11 percent of the promoters share holding.
Apollo Hospitals had a 78 percent, 2.3 percent of Ashok Leyland 28 Percent in JK Tyres and 23 percent pledging in Future Group like the pledging of Promoters holding list continues here.
I had filtered a list of companies with the Market capitalization of Rs. 3000 Crore and more than 50 percent of Pledging in Promoters Holding. It was listed with some of the major companies being named.
It’s not worth to invest in a company with only the screening of Debt Free and Dividend Yield, but also we have to find out these pledging concern. Pledging on Promoters holding is not a healthy thing for the Long term Investors.
Even if good companies are pledging, the reasons for it should be revealed. It is important to note that Value Investors will not invest in these type of listed stocks.
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