In FY24, 52 companies saw a 35% decrease— ₹82,576 crore in absolute terms—in the value of their pledged shares, reveals a Mint analysis based on the latest regulatory filings of Nifty 500 companies, which account for 91% of the overall market value of all NSE-listed firms. 

Another 27 companies increased their pledges by 20% or ₹26,128 crore. 

While 383 companies had no pledged shares, the remaining 38 companies saw no change in their holdings. 

The aggregate ₹56,448-crore decline in the value of the pledged shares of these 500 companies in FY24 follows a net reduction of ₹52,217.54 crore in FY23 and an increase of ₹26,928 crore in FY22. The value of the pledges is calculated using a volume-weighted average price.

The Nifty 50 and Sensex indices rose more than 25% in FY24, while the Nifty 500 index, which has a total market capitalisation of ₹366.5 trillion, gained 39%. In FY23, returns from the Nifty and the Sensex contracted 1.75% and 0.48%.

“Pledging shares does not always signify a negative stance, particularly in strong bull markets,” said Abhilash Pagaria, head of Nuvama Alternative and Quantitative Research. “Given the robust equity markets and numerous avenues for capital raising, now is an opportune moment to decrease pledges, especially for companies that do not require additional capital.”

Adani Group companies witnessed an aggregate decline of ₹18,696 crore in promoter pledges in FY24. This included Adani Power (from 25.15% to 16.1%), Adani Green (from 3.5% to 1.02%), Adani Ports (from 4.66% to 1.7%), Adani Energy Solutions (from 3.75% to 2.58%), and Adani Enterprises (from 0.64% to 0.08%), Mint’s analysis shows.

Promoters of Jindal Stainless Ltd, Suzlon Energy Ltd, Tata Motors, Bharat Forge Ltd, Tata Communications Ltd, and Usha Martin Ltd now have zero pledged shares. Promoters of Emami Ltd reduced their share pledges from 40.12% in FY23 to 13.09% in the just-concluded financial year; while those of TCS reduced their pledged shares from 0.48% to 0.28%; and Jindal Steel from 36.43% to 13.11%.

Companies that significantly reduced their pledge values last year also tended to deliver positive returns at the stock market. 

Examples include Suzlon Energy (411%), Jindal Stainless (140%), JSW Energy (120%), Adani Ports (112.3%), Adani Green (108.3%), Adani Enterprises (83%), Sun Pharmaceutical (64.8%), Tata Communications (61.4%), Bharat Forge (46.6%), and TCS (21%).

“There is a significant understanding that has now developed with promoters over a period of time that the capital markets do not appreciate leverage, especially at the promoter level,” said Bhavesh Shah, managing director, head-investment banking, Equirus Capital. “We have seen that the leverage acts as a hindrance in valuation multiples and value creation process.”

According to Pagaria of Nuvama, the market views reduction in pledges positively, as it indicates that immediate funding isn’t necessary and can be managed effectively. He added that the reduction in pledges during the March quarter made it clear that capital-intensive businesses were witnessing a decline in promoter pledges.