Promoter Pledging

A pledge lets a promoter borrow against the shares without selling them. The voting right usually stays, until a default lets the lender enforce the pledge.

In India the pledged quantity is disclosed in the shareholding pattern. A rising pledge is one of the first public signs that the promoter needs cash.

A low, stable pledge against a clearly disclosed personal or group investment can be ordinary. A high and rising pledge, especially above half of the promoter holding, is a risk to the stock because enforcement can dump shares.

The loan is often at the promoter level, not the company level, so it may not be in the company's debt ratios. The stock can still gap down if the pledge is invoked. This is the action. Pledged shares, listed under Indian market terms, are the shares themselves.