**[investwise]** MS: Indebted Corporate India, Are These Companies Shorting Candidates?

 

Morgan Stanley Promoter Equity Pledging-What's At Stake?   Quick Comment: As per the SEBI regulations initiated in March 2009 promoters/founders of companies are required to disclose the amount of stock they have pledged.   The following are our observations on the last disclosures made as of QE Mar-10: What's at Stake? 723 companies have disclosed pledges on their holdings for the Mar-10 quarter versus 745 companies in Mar-09. The stocks of these companies account for 22% of India's current market cap, a tad higher than in Mar-09.   As at the end of Mar-10, the total value of pledged stocks was US$34.2 billion versus US$15.8 billion in Mar-09. They accounted for 11.4% of their market cap versus 12.3% at the end of Mar-09 and the peak of 13.4% at the end of Jun-09. This pledged value is about 2.5% of the current market cap of the country, marginally lower than the Mar-09 level.   Assuming 50% margin, the bank credit to these promoters at US$17 billion is 2.4% of outstanding bank credit.   At the sector level, Utilities (driven by new listings like Adani Power, Indiabulls Power and JSW Energy) have the biggest pledging by promoter, followed by Industrials. Consumer discretionary followed by Materials have the most widespread pledging by promoter.     Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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