When you get to the page of the stock which you want to check promoter pledged shares, find Shareholding Pattern and click on it. Visit Mone圜 from your browser, search for any stock. Do not try to earn quick money from bad companies. There are many companies that are clean with a strong promoter / management. There are more than 5000 companies listed in the stock market. If a promoter has pledged very high number of shares, again, it’s better to avoid.If there are news articles where the promoter has been suspected of scam or there have been income tax raids – avoid those companies. Put the name of the promoter in Google and include the word ‘scam’ or ‘arrest’ or ‘income tax raid’ along with the name.Avoid investing if the promoter of a lesser known company (small / mid caps) has pledged their shares.How to decide whether you should be invested in a company where the promoter has pledged shares? They have huge cash reserves and their business is doing extraordinarily well too. Is it a cause for concern? Definitely not. The promoters of ‘Asian Paints’ have pledged nearly 12% of their shares. The percentage of pledged shares is also very important. When a promoter pledges shares of his company, it’s important to dig deeper and understand the reason behind the move. However, for a fundamentally strong company, pledging of shares up to 10-15% or a little more, should not be a problem – if the reason is valid. Meaning: Promoter Pledging Shares of his Company This could lead to the stock price falling further and the percentage of pledged shares increasing. The bank asks the promoter to pledge more shares or they would sell the pledged shares in the market. The value of 50 shares which the bank has kept as guarantee (collateral), has also fallen to ₹ 4000. Now, a few days later, the stock price falls to ₹ 80. The promoter pledges 50 shares, the value of which comes to ₹ 5000. This can potentially turn into a vicious cycle for a fundamentally weak company. When this happens, the news goes out into the market that the promoter has pledged more shares, the stock price falls further, the lender asks for more collateral. The problem arises when the stock price falls and the lender (bank) asks for higher collateral – which means, the promoter has to pledge more shares. In India, Promoter Pledging is considered to be a warning sign that the business could be in trouble in the future. The promoter could be pledging shares for various reasons – to meet the running capital requirement of his business, for personal needs or to fund new acquisitions. Promoter Pledge means the owner of a company takes a loan against his own shares.
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