Promoter Pledge
Shares held by promoters that have been given as collateral against borrowing.
Formula
Pledge % = Pledged Shares / Total Promoter Shares x 100, disclosed quarterly
Unit
%
In depth
Pledging is legal and disclosed, and it becomes dangerous through a specific mechanism: if the share price falls, the lender demands more collateral, and if the promoter cannot provide it the lender sells the pledged shares into the market, pushing the price down further and triggering more selling. This is a self-reinforcing spiral that has destroyed several Indian mid-caps within weeks. High pledging also means the promoter's economic interest is smaller than their stake suggests, weakening the alignment high promoter holding is supposed to indicate. The quarterly shareholding pattern discloses the percentage, and any large increase deserves investigation.
Worked example
A promoter holding 54% with 41% of that pledged has genuine unencumbered exposure of 54% x 59% = 32%. A 30% price fall can force the lender to sell shares equal to several days of the stock's entire volume.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Promoter Pledge” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.