High Pledged Stocks in India: Did you know, just like we submit collateral for a mortgage loan, sometimes promoters also pledge the shares of their companies to borrow money? A pledge on shares is not altogether a bad thing.
However, it should not be overlooked either. You would be amazed to know that many renowned stocks have their full or partial promoter shareholding pledged. In this article, we will present you such well-known high pledged stocks in India.
High Pledged Stocks in India
We’ll be reading about the businesses and key metrics of some famous high pledged stocks in India. In the process, we’ll also learn the reason behind the shareholding pledges. So without further ado, let us read ahead.
High Pledged Stocks in India #1 – Ambuja Cements
|CMP||₹458||Market Cap (Cr.)||₹91,657|
|Promoter Holding||63.2%||Pledged %||100.0%|
|Book Value||₹134||Price to Book Value||3.08|
|Debt to Equity||0.0||Interest Coverage||21.8|
|Net Profit Margin||8%||Operating Margin||13%|
Founded in 1983, Ambuja Cements is of the largest cement companies in the country. It is owned by the oil-to-ports conglomerate the Adani Group. Over the last four decades, the company has had some change of hands.
Initially, it was acquired by Swiss-based Holcim Group. Recently, it was acquired by the first-generation billionaire Gautam Adani.
Ambuja has a cumulative production capacity of 31.45 MTPA through its 6 integrated cement plants, 8 grinding units, and 5 bulk cement terminals. Furthermore, Ambuja owns a majority of 56.7% stake in ACC, making it a listed subsidiary of the former.
Ambuja’s whole promoter shareholding of 63.2% of the Adani family is pledged as they borrowed funds for the buyout while pledging the shares as collateral.
The cement giant has built a well-diversified presence in India catering to northern, western, central and eastern parts of the country. The image below highlights the diversified operations of Ambuja Cements Ltd.
Ambuja Cements is a debt-free high pledged stock. It has consistently delivered profits for more than ten years. It recorded a profit after tax (PAT) of Rs 3,024 crore in FY23 on sales of Rs 38,937 crore.
High Pledged Stocks in India #2 – Vedanta
|CMP||₹272||Market Cap (Cr.)||₹105,700|
|Promoter Holding||68.1%||Pledged %||100.0%|
|Book Value||₹106||Price to Book Value||2.68|
|Debt to Equity||1.7||Interest Coverage||4.29|
|Net Profit Margin||9.9%||Operating Margin||23.4%|
Vedanta was founded four and a half decades ago in 1979 as Sterlite Industries. Through organic and inorganic routes, it has emerged as the largest natural resources mining company in India and one of the largest across the world.
The promoter company Vedanta Resources holds a majority 68% stake in the company. However, its complete shareholding is pledged as the parent company has heavy debt on its balance sheet.
Vedanta’s mining operations are spread across South Africa, Liberia and Namibia. Its business interests include oil & gas, zinc, lead, silver, aluminium, iron ore, steel, copper, ferroalloys, and nickel.
Hindustan Zinc is a listed subsidiary of Vedanta in which it holds a majority 64.92% stake. In addition to this, BALCO and Nicomet are two prominent subsidiaries of the mining giant.
Its management has guided mined metal production and refined metal production of 1,100 kt and 1,075 kt for FY24. Furthermore, it is eying saleable production of 750 MT silver during the fiscal year.
Vedanta earned a profit after tax of Rs 14,503 crore in FY23 on sales of Rs 1,47,308 crore. Furthermore, its dividend payout ratio stood at a whopping 357% (Rs 51,776 approx.) during the fiscal. The objective for heavy dividend payout is to reduce the debt of the holding company Vedanta Resources.
High Pledged Stocks in India #3 – Suzlon Energy
|CMP||₹18||Market Cap (Cr.)||₹24,098|
|Promoter Holding||14.5%||Pledged %||80.8%|
|Book Value||₹1||Price to Book Value||20.80|
|Debt to Equity||1.8||Interest Coverage||1.41|
|Net Profit Margin||2.9%||Operating Margin||13.9%|
Suzlon Energy was started by Tulsi R Tanti in 1994 when he acquired two wind turbines to meet the power needs of the family’s textile business. Later he set up Suzlon to provide a whole range of wind energy solutions sensing a largely untapped market in India.
Suzlon is engaged in the business of manufacturing wind turbines. It is vertically integrated and caters to 1,900+ companies from 17 countries worldwide. It manufactures and markets wind turbine generators and forging & foundry parts.
In addition to this, the company also provides project execution, sale/sub-lease of land, and operation and & maintenance services to its customers.
However, it has been a difficult journey for Suzlon so far. The company ran into serious troubles because of weak demand and debt obligations, reporting losses of as much as Rs 9,133 crore in FY15.
It went through a restructuring process in which various banks and other financial institutions took equity in return for debt and unpaid interest. The company also sold its various assets to raise money. As a result of dilution, the promoters now hold a 14.5% stake in Suzlon Energy with close to 81% of that pledged.
Suzlon Energy earned a net profit of Rs 2,887 crore in FY23, supported by its other income. Overall, the company looks to be on a path of profitability after running in losses for a decade. On a cautionary note, it still has a high debt-to-equity ratio of 1.76 and low-interest coverage of 1.41 times.
High Pledged Stocks in India #4 – Jindal Stainless
|CMP||₹360||Market Cap (Cr.)||₹29,700|
|Promoter Holding||57.9%||Pledged %||78.0%|
|Book Value||₹145||Price to Book Value||2.48|
|Debt to Equity||0.3||Interest Coverage||9.55|
|Net Profit Margin||5.84%||Operating Margin||10%|
Jindal Stainless Ltd. (JSL) was founded by the late Om Prakash Jindal in 1970. Over the last fifty years, the company has grown into the top stainless steel producer in India and one of the top five worldwide (excluding China).
Currently managed by Ratan Jindal, JSL has two state-of-the-art stainless steel manufacturing plants in Odisha and Haryana. Furthermore, it also has a facility in Indonesia which helps the company to cater to customers in South-East Asia and nearby regions.
Talking about its product portfolio, it includes a diverse range of products including steel slabs, coils, plates, sheets, precision strips, etc. These primarily go into cookware and consumer durable industries. JSL has a steel melting capacity of 3 MTPA.
Its products across 120 SKUs are exported to over 40 nations across the globe. To cater to its customers, Jindal Stainless has built a strong supply network of 7 service centres and 14 offices in total.
The promoters hold a 57.9% stake in the company of which 78% is pledged as the promoter entities borrowed submitting JSL’s stock as collateral.
JSL reported a net profit of Rs 2,774 crore in FY23 on sales of Rs 35,697 crore. Its net profit shall look unusually high compared to the previous periods as it underwent a merger with Jindal Stainless (Hisar) Ltd.
High Pledged Stocks in India #5 – IndusInd Bank
|CMP||₹1,380||Market Cap (Cr.)||₹107,000|
|Promoter Holding||16.5%||Pledged %||45.48%|
|Book Value||₹616||Price to Book Value||2.20|
|Debt to Equity||7.2||Interest Coverage||1.53|
IndusInd Bank was founded by Srichand P Hinduja in 1994. Since then, it has grown into one of India’s most prominent full-service banks. It is presently ranked as 5th largest private-sector bank in the country.
It is part of the Hinduja Group which also owns leading commercial vehicles manufacturer Ashok Leyland. The promoter group holds a 16.49% stake in the company of which 45.48% is pledged. The billionaire family has been borrowing against IndusInd’s shares to fund their other businesses and refinance debt.
IndusInd Bank offers a variety of services such as loans (personal, vehicle, mortgage, business, etc), insurance, savings a/c, salary a/c, debit cards, credit cards, foreign exchange and more to its personal, NRI, corporate and business customers.
At the end of FY23, its loan book stood at Rs 2,89,924 crore against the deposits of Rs 3,36,120 crore. The bank has more than 34 million customers across multiple segments which are served by an extensive group network of 2,606 branches and 2,878 AMs
IndusInd Bank earned a net profit of Rs 7,443 crore on revenue of Rs 36,368 crore in FY23. It reported strong asset quality with GNPA at 1.98% and NNPA at 0.59%. It has a well-diversified loan book with a retail and wholesale proportion of 54 to 46 respectively.
List of High Pledged Stocks in India
The list below puts together some more high pledged stocks in India other than those covered above.
|Company Name||CMP||Promoter Holding||Pledged %|
|Max Financial Services||₹776.75||10.2%||93%|
|GMR Airports Infra.||₹51.05||59.0%||71%|
|Medplus Health Services||₹948||40.4%||51%|
|Jindal Steel & Power||₹641||61.2%||34%|
As we conclude our study of ‘high pledged stocks in India’, we can say that promoter pledging their shareholding is not always a bad sign. Just like regular people, promoters may also require loans to fund their other businesses.
However, investors must exercise caution when it is because of issues inherent in the business (as it is with Suzlon).
What are your views on investing in stocks with high promoter shareholding pledges? Do you avoid those stocks altogether? How about we continue this conversation in the comments below?
Written By Vikalp Mishra
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