21 May 2019
Share Pledge Requires Adequate Cushion
Investments in the capital markets are considered riskier proposition. Till date, it was true for all investments made in the equity shares and gained more significance when an investor decided to take a direct exposure in equity and invest on its own in listed equity company shares. These companies raise resources from various sources including banks and financial institutions. Sometimes, the promoters of these companies also need to raise resources to plough back in the company; this can be in the form of working capital requirement or increase their holding.
For this, promoters pledge their holdings in the company either with banks, non-banking finance companies (NBFCs) and mutual funds; this being the most recent phenomenon, which has been observed and debated everywhere in the capital markets.
Pledging of shares owned by promoters (of listed companies) to raise...