Which fear is driving companies to repay their loans?

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Promoters of top 500 companies have shown a record reduction in their pledged shares in the fourth quarter of financial year 2022-23. All the large cap companies of the country are trying to reduce their debt burden as early as possible. This was clearly evident in the financial results of the companies.

In the fourth quarter of the financial year 2022-23, the promoters of the top 500 companies have registered a record reduction in their pledged shares. According to a report in Mint, during the fourth quarter of the financial year, the promoters of the top 500 companies redeemed pledged shares worth Rs 88,345 crore or about $ 11 billion. These 500 companies account for 96% of the total value of listed companies in India. Top companies whose pledged shares have come down include Vedanta, Hindustan Zinc, Indus Towers and JSW Steel, apart from the listed companies of Adani Group. During the March quarter, the value of Nifty 500 companies decreased by 6.4% to Rs 252.66 lakh crore. However, by the end of the quarter, the value of pledged shares of promoters in these companies has come down from Rs 4.39 lakh crore in December 2022 to Rs 3.5 lakh crore.

What is the reason? The Adani Group has suffered a major setback after the report of the American research agency Hindenburg. In this report, Hindenburg  highlighted in detail about the loan taken by pledging shares on behalf of Adani Group. After the the report, the shares of all the 10 listed companies of Adani Group collapsed.  Due to this, the common investors along with the group suffered huge losses. After this report, Hindenburg is feared among the companies which have taken loans by pledging their shares. They are apprehensive that if Hindenburg releases report on them regarding the loan, new trouble may arise. For this reason, all the big companies are reducing the debt burden by redeeming the pledged shares.