Pledged share disclosure diktat may extend to holding companies.

8. Pledged
share disclosure diktat may extend to holding companies.

The Securities and Exchange
Board of India (SEBI) is considering amendments to regulations with regard to
pledging of shares by promoters of listed firms to include their holding
companies too.

The regulator was examining if
promoters can be asked to disclose pledging of a holding company shares with
banks and non-banking finance companies (NBFCs).
In the aftermath of the Satyam Computers fiasco, Sebi had mandated that
promoters of listed companies disclose the amount of shares they had pledged.
The shares of holding companies were, however, kept out of the purview of this
guideline as holding companies were not listed on exchanges.

Disclosing information about
shares of holding companies involves the risk of divulging vital information
about the monetary value of their shares and the firm’s holding pattern in
subsidiary firms that are listed. Any fall in the valuation of shares of holding
companies, if pledged, would result in lenders asking the promoters to top up
their margins. In case the promoters fail to do so, the lenders may sell the
pledged shares to recover their dues.This raises the hazard of effecting a
change in ownership, and the market regulator has received representations that
such risks need to be communicated to investors. Sebi is currently examining
possibilities and consequences of any such amendment. The issue is quite complex
as holding companies are generally unlisted and, hence, don’t fall under Sebi’s
purview.

(Source : The Business
Standard, 14-3-2009)