Thursday, December 6, 2012

INDIA INC: SHARE PLEDGING

Companies need to be proactive with disclosure of pledging

The more serious issue, again when we think about Satyam, is that the funds may be going elsewhere. “If the company is ploughing back the funds that promoters have borrowed by keeping shares as collateral in the company itself, then there’s nothing to worry...,” explains Ashok Jainani, VP (Research & Market Strategy), Khandwala Securities Ltd. Pledging as a practice is being exercised since ages to raise money.

However companies used to evade disclosure of their pledging details earlier. “These are notable corporate names, which people trust and expect them to make disclosures on their own. It’s done voluntarily by most global firms,” says a noted financial analyst on condition of annonymity. Many such companies claim to uphold the highest standards in corporate governance. But by responding to SEBI’s directive, these companies have done little to reassure investors of the honesty of their intentions (if their intentions are indeed honest that is!). It’s imperative for such companies to mend their ways, just as it is imperative for SEBI to ensure that no defaulters are spared.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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