Shares Pledged Meaning | Why Avoid Companies with High Pledged Shares?

Shares Pledged Meaning: When you start your investing journey, you often hear “choose companies with no pledged or low pledged shares”. But you do not understand the proper meaning of that.

You face difficulty finding companies with no pledged shares. If you want to make a decent profit from investing then you have chosen fundamentally strong companies. And pledging of shares is one of the important factors of fundamental analysis. You can not ignore this point.

In this article, we are going to discuss the concept of pledging shares in a very easy manner and easy language. Why should you avoid companies with high pledged shares?

If you read this article completely I am damn sure you definitely understand this concept very easily. So without wasting time we will proceed to our main topic.

Shares Pledged Meaning

Shares Pledged is the process of using shares of promoters of the company as collateral to fulfill their financial requirements.

That collected collateral use by the promoter for working capital requirement, funding over ventures, personal obligation, to carry a new obligation, and more

Simple meaning

Share pledged means “XYZ Company” takes a loan from lenders in respect of giving shares to landers on certain terms and conditions.

In Hindi simple meaning “Shares ko Girvi Rakna”

Simple steps –

  • Company prompters give shares to lander or bank
  • Take a certain amount of money as a loan.
  • And then repay money to the bank with calculated interest.
  • After finally promoters get their shares back.

Why prompters of the company pledge shares?

1. Earlier we discuss that promoters take loans from lenders to meet their business and personal requirements.
2. Normally pledging of shares is the last option to remain to promoters to raise funds. 3. Pledging of shares is a safe way to raise funds for company requirements.
4. If any promoter collecting fund by pledging shares it means their all fundraising ways are closed.

Why it risky to invest in companies with high pledged shares?

Companies with high Pledge shares have a high risk to invest in it. That makes a negative impact on a particular stock price. That makes fear in investors. And they start to panic sell on that stock.

Selling stocks by lenders may change the shareholding pattern of the company. And that reduces the power of voting of promoters. Due to this they unable to take the crucial decision of the company.

How to find detail of pledged shares of company?

You can find information on pledged shares information major financial websites like moneycontrol, screener, etc.

If you want the latest data on the company’s pledge shares, I recommend you go with NSE/BSE websites. They contain more latest data on pledge shares.

Here we will see how to find a shareholding pattern of a particular company. Follow exact steps and all done.

1. Visit the BSE India website
2. Search the name of the company
3. Then click on “shareholding pattern”
4. Then open the latest quarter shareholding pattern.
5. Now you can find a statement of pledge shares.

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