Pledge Shares

What are Pledge Shares?

According to the recent survey, almost 41 companies’ 100 % promoters pledge share that is kept Mortgage. Reports given by BSE claim that till 26th April the company’s promoter data pledge value was 2.26 lakh. this is 1.60% of the BSE 500 index total value.
Out 5726 companies 2932 company promoters have kept their pledge share in mortgage and have taken a loan on them. Now the point is which are these companies which are under debt and should they still trade? We will talk about the analysis of these companies later. Currently, we will begin by talking about traders who are new in the market or have absolutely no knowledge about share pledging we would like to brief you about it. We have all know what mortgage means it means keeping your valuable such a gold, house or share to someone or Bank and replacing it with money. And after a given time we have to give back the money lent to us in place of these values and take them back. In case the person fails to return the money then the bank or lender can sell their valuable. Similarly, a promoter can also do the same with their share.

Who are these Promoters?

Promoters are the owner of the company. To meet the financial need or for the growth of the company, the promoters keep pledge these shares. The loan on these shares depends completely on the market value.
In case the company is not able to return the amount taken from the company the lender has full permission to sell these pledge shares.
Now let us know about its pros and cons
If the promoter takes a loan on the shares and benefits by increasing the growth of the company, then it is known to be beneficial for the company as well as for the promoter but when the promoter pledges its share the news gets leaked in the market and this effects the image of the company as well. Traders after listening to this news believe that the company is facing some serious losses and they lose their faith in the company and share. Thus the value of shares decreases after which the promoter again has to pledge shares to the lender. And then the depletion cycle continues. Sometimes the promoter has to pledge 100% of its share which is not good for the growth of the company.

Should one trade in such companies or not?

Usually, we check the number of shares the company is left with. In case the promoter pledges 25% of this share then the trader should not worry about it. In case the share pledge increase from 30-50% then the level is known to be medium.in this case, the trader should keep a check on growth level and trade accordingly. In case 70% of the shares are pledged then the company should keep alert on this can be dangerous for the company. Let us know the companies whose shares are a pledge.
Zee. Entertainment
Reliance
Dish TV
Sun Pharma
Ajanta
Where some of the companies which had 35-68% of their shares pledged. These were a few companies that we have mentioned let us know about the companies you know in the comment section

Click on the link to see more details about Pledge Shares.

https://www.youtube.com/watch?v=AaDNdjT9m78

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