Investors are paying heavy price for indebtedness of promoters of many companies. Shares of more than 100 companies, whose promoters pledged at least half of their holdings, have crashed to their lows with prices succumbing to fears of margin calls from lenders, amid bearish market conditions since January this year.
Investors have lost wealth of more than Rs 50,000 crore in these companies. “While deteriorating market conditions led the initial fall in shares, selling pressure intensified subsequently amid forced liquidation by lenders after prices reached to margin touchline,” said Nimish Shah, managing director , Fortune Financial Services.
Margin calls are mostly seen in real estate and infrastructure companies in the current market, he added. Promoters of as many as 111 companies pledged anywhere between 50% and as high as 100% of their holdings, shows shareholding information disclosed to stock exchanges for the quarter ended December 31, 2010. Their shares have taken a severe beating with a few plunging as much as 90% plus over their 52-week high values recorded in the past year’s bull run.
ET, however, could not independently determine if margin calls dragged down prices of top losers after the initial fall, leaving it to investors to apply their own judgement on the possible factors driving prices to their lows.
It is likely that promoters of some of the companies may have freed their holdings from pledge partly or fully after December 31 thereby saving themselves from margin calls pressure.
“Promoters of many companies , particularly small and medium-sized , have even borrowed money to be parked in equity that could help them comply with eligibility criteria for listing on stock exchanges,” said KR Choksey Shares and Securities managing director Deven Choksey . He feels that launching SME stock exchanges could help get rid of the practice of borrowing capital, provided companies are allowed listing with lower net worth than required by existing exchanges, like the BSE and the NSE.
Source : ET
Investors have lost wealth of more than Rs 50,000 crore in these companies. “While deteriorating market conditions led the initial fall in shares, selling pressure intensified subsequently amid forced liquidation by lenders after prices reached to margin touchline,” said Nimish Shah, managing director , Fortune Financial Services.
Margin calls are mostly seen in real estate and infrastructure companies in the current market, he added. Promoters of as many as 111 companies pledged anywhere between 50% and as high as 100% of their holdings, shows shareholding information disclosed to stock exchanges for the quarter ended December 31, 2010. Their shares have taken a severe beating with a few plunging as much as 90% plus over their 52-week high values recorded in the past year’s bull run.
ET, however, could not independently determine if margin calls dragged down prices of top losers after the initial fall, leaving it to investors to apply their own judgement on the possible factors driving prices to their lows.
It is likely that promoters of some of the companies may have freed their holdings from pledge partly or fully after December 31 thereby saving themselves from margin calls pressure.
“Promoters of many companies , particularly small and medium-sized , have even borrowed money to be parked in equity that could help them comply with eligibility criteria for listing on stock exchanges,” said KR Choksey Shares and Securities managing director Deven Choksey . He feels that launching SME stock exchanges could help get rid of the practice of borrowing capital, provided companies are allowed listing with lower net worth than required by existing exchanges, like the BSE and the NSE.
Source : ET
No comments:
Post a Comment