Pledging shares against debt is a sure recipe for disaster, especially in a falling market. Around 30 companies have actually pledged shares of more than 50% of their paid-up capital. Among the top companies with the highest value of pledged shares were TCS, Adani Power and JP Power—with a pledged value of $4.20 billion, $2.10 billion and $1.20 billion respectively
On 19th August, Moneylife had reported on how KS Oils saw its share price plummeting by 32% on the Bombay Stock Exchange (BSE), after months of steady decline (Private equity funds slip as KS Oils slides).
KS Oils had pledged around 80% of its shares against loans. On 16th August, KS Oils crashed by a whopping 32% after Edelweiss Finance and Investment Limited sold around 44.50 lakh shares on the BSE at Rs9.13 a share. Earlier, on 12th August, Sicom had sold 25.78 lakh shares of KS Oils at Rs12.96 on the National Stock Exchange. KS Oils has seen its scrip plunge by 90% since January 2010.
Pledging shares against debt has proven to be a sure recipe for disaster.
There are 768 companies that have pledged their shares-amounting to a total value of $33.40 billion (Rs1,536.60 billion) as on June 2011.The subsequent fall in the market since then could spell disaster for these companies. Around 30 companies have pledged shares of more than 50% of their paid-up capital.
As per a recent Morgan Stanley Research report, at yesterday's prices, the pledged value of shares was at $27 billion versus $33 billion at the end of the June quarter, a drop of 18%, with the number of pledged shares remaining the same. The Sensex dropped by 13% from 18,846 to 16,341 points during this period. However, if the company's share price goes below a certain level, the company will have to make immediate payment in cash—or pledge more shares—to maintain its margin. If the company cannot do this, lenders will resort to selling the shares to recover the money, thereby reducing the promoter's stake as well as the price of the shares.
Therefore, out of the 768 companies that reported promoter pledging in June 2011, 79 have revoked their pledges on shares and are out of the list. An additional 30 companies have reported promoter pledging during the quarter. This could be on account them having to maintain their margin with banks.
The pledged value as per the market cap of stocks of these companies has fallen to the lowest level since March 2009 at 9.9% versus 10.7% in the previous quarter. Compared to India's total market capitalisation, the value of pledged shares was 2.2%.
Among the top companies with the highest value of pledged shares were TCS, Adani Power and JP Power—with a pledged value of $4.20 billion, $2.10 billion and $1.20 billion respectively. The value of pledged shares as per the total share value for these companies were 8%, 39% and 52% respectively. Tata Motors, Asian Paints and Tata Power also figure among the top six companies.
Falcon Tyres had the highest percentage of pledged shares as of paid-up capital with 79%. It was one of the 30 companies which have pledged 50% and more of their shares.
During the quarter, at the sectoral level, the materials and healthcare sectors saw an increase in the absolute pledged value while the rest saw a fall with industrials seeing the maximum fall. In terms of share in total pledges to total pledged (in value terms), materials saw the biggest increase in the share of pledges and industrials saw the biggest fall.
The Morgan Stanley report further states that assuming a 50% margin, the bank credit given to the promoters would be around $16.20 billion. This accounts for 2% of outstanding bank credit of the companies with pledged shares.
In the consumer discretionary sector, value of pledged shares amounted to $5.50 billion. This accounted for 16.5% of the total share value. The top three companies according to pledged value in this sector were Videocon Industries, Hero MotoCorp and Sun TV network.
Comprehensive data integration using SAS data warehousing and business analytics would speed the investigation of suspicious transactions by SEBI and boost investor confidence, SAS said in a statement
New Delhi: Business analytics software and services provider SAS today said it has been selected by the Securities and Exchange Board of India (SEBI) as a solutions partner for the market regulator's investigations department, reports PTI.
Comprehensive data integration using SAS data warehousing and business analytics would speed the investigation of suspicious transactions by SEBI and boost investor confidence, SAS said in a statement.
"Increasing regulations and scrutiny demand sophisticated analysis and monitoring to spot market malpractice and trading compliance. To achieve the robust surveillance required to ensure unbiased trading platforms, SEBI choose SAS for its investigations department," it said.
SEBI's investigators and analytics group would use SAS to analyse market behaviour.
The market regulator would be provided robust warehouse, high-end analytics and better predictive modelling and text mining to handle data growth and build a tighter fraud surveillance and investigation platform.
Commenting on the selection, SEBI general manager Avneesh Pandey said: "Pulling data into our warehouse and analysing it the next day is our single most important task. With SAS, we maintain uniformity, making data easier to analyse. The result is smarter investigations for quicker results."
SEBI already collects 25 GB of data on the market every day and this is likely to reach around 80 GB per day within two years.
"With SAS, we can accelerate the process of utilising this data," Mr Pandey said.
Besides addressing growing volumes of data, SAS' technology would give SEBI a single view of customers across exchanges.
"SEBI can now establish relationships between market participants and generate more accurate fraud alerts based on market participants' behaviour. SEBI also wanted to tap unstructured data, including analyst recommendations, blogs, annual reports, etc, to understand the social media impact on investor behaviour," the statement said.
SEBI intends to build analytical models using SAS' 'EnterpriseMiner' system to identify known market manipulation patterns such as circular trading, pump and dump, insider trading and front-running.
"We are very pleased to partner with SEBI in building best practices to spot market malpractice and trading compliance, besides addressing the growing volume of data.
SAS... will be able to provide SEBI a single view of customers across exchanges," SAS regional director (South East Asia) Sudipta K Sen said.
ITC had introduced the 'Armenteros' range of handrolled cigars in Delhi, Mumbai and Kolkata last year
Diversified business group ITC opened its first retail store selling premium cigar brand 'Armenteros' in Delhi as part of plans to strengthen its presence in the premium tobacco segment.
The company had introduced the 'Armenteros' range of handrolled cigars in Delhi, Mumbai and Kolkata last year. According to sources, ITC is planning to launch the luxury store, 'Cigar Republic', in other key metros in future, apart from the capital.
According to market estimates, the premium cigar category is growing at 20% per annum in the country, with increasing disposable incomes and exposure to global lifestyles, though the segment is still at a nascent stage.
Apart from cigars and accessories, the store, which is located at ITC Maurya Hotel, will also have a library showcasing literature on cigars and other objects of interest to cigar connoisseurs.
'Armenteros' cigars are being sourced from the Dominican Republic and are being manufactured at La Aurora, which is one of the oldest cigar companies in the world. Depending on the cigar sizes (Churchill, Torpedo, Corona, Petit Corona and Robusto), they are sold at prices ranging from Rs3,000 to Rs10,000 per pack.
On Tuesday, ITC ended 0.1% up at Rs202.65 on the Bombay Stock Exchange, while the benchmark Sensex gained 0.96% to 16,498.47.