Suzlon, Sobha lead the way in falling promoter pledges during the September quarter

In some signs of easing stress among company promoters, the level of promoter pledged shares of BSE 500 companies fell to 3.9% at the end of the September quarter, from 4.5% in June.

While promoters of Suzlon Energy Ltd. and Sobha Ltd. have revoked their entire pledged holdings in the September quarter, others like Max Financial Services, JSPL and Emami have also seen a reduction in pledged promoter holding. In fact, more than one-third of the companies have revoked some portion of their prompter pledges during the September quarter.

However, it must be noted that based on the September quarter shareholding pattern, Suzlon's promoters have only 13% stake in the company.

Among constituents of the BSE 500 index, promoters of 93 companies had either pledged all or part of their holdings as of the September quarter, according to data from Ace Equity.

While promoters of Ambuja Cements and Eureka Forbes have pledged their entire holding, companies like Vedanta, Polyplex and Hindustan Zinc, whose promoter happens to be Vedanta, have pledged more than 99% of their holdings.

It must be noted that company promoters pledging shares does not necessarily mean that either the company or its promoter is going through financial stress. Yet, a revocation or reduction in pledged shares is often a cause of cheer for investors. The move generally signals lower financial burden for the promoter, thereby lifting market sentiment regarding the company.

For example, Suzlon's shares gained over 4% on October 4, when it reported that its promoters have released pledge on over 97 crore shares. The stock gained another 5% the following day. Since that announcement, the stock has gained 11%.

Over the last six months, shares of Suzlon have gained nearly 4x. Similarly, shares of Sobha Ltd., the Bengaluru-based real estate developer have also surged 55% during the same timeframe.

On the flip side, higher promoter pledges come with higher risk and volatility in the stock price. Polyplex promoters have 99.97% of their holding pledged at the end of the September quarter. The stock is trading at a 52-week low and is down nearly 40% from its 2023-peak.

Within the Nifty 50, companies with the highest promoter pledges include IndusInd Bank (47.3%), Apollo Hospitals (16.09%) and JSW Steel (14.12%).