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NISM Certifications · NISM-Series-XV: Research Analyst · Company Analysis - Business and Governance

A promoter group holds 60% of a listed company, and 45% of its holding is pledged with lenders. The promoters hold 6,00,000 shares in all. How many shares are pledged, and why would an analyst care?

The pledged shares are 45% of 6,00,000, which is 2,70,000. Analysts care because a falling share price can trigger margin calls or invocation by lenders, forcing sales, pressuring the stock and potentially reducing promoter control, which signals financial stress and governance risk.

  1. A2,70,000 shares; a fall in price may trigger invocation of the pledge, risking loss of control and selling pressureCorrect
  2. B2,70,000 shares; pledging has no effect on the share price or control
  3. C3,60,000 shares; pledge applies to the whole promoter holding
  4. D1,20,000 shares; pledge is only 20% of holding

Explanation

Pledged shares = 45% of 6,00,000 = 2,70,000. Not 3,60,000, which is 60% of the holding (confusing the promoter stake percentage with the pledge percentage). If the price falls, lenders may demand margin or invoke the pledge, selling shares and hurting both the price and promoter control.

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