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#PledgeShares - Is it really that bad as being made out ?

There is so much fuss about #AsianPaints additional Pledged share.

#TCS do have some pledge.

Lets understand, it's Pros & Cons.

How some companies take its advantage while others fail miserably?

1n #PledgeShares - Is it really that bad as being made out ?<br />
<br />
There is so much fuss about #AsianPaints additional Pledged share.<br />
<br />
#TCS do have some pledge.<br />
<br />
Lets understand, it's Pros & Cons. <br />
<br />
How some companies take its advantage while others fail miserably?  #Stocks #investment #IndianStocks
Pledging means Promoter use some of their shares as collateral for loans from Banks/NBFCs.
This is Pledge Creation.

Why do they pledge?

Pledge shares act as collateral hence it is Secured loan with INTEREST RATE LOWER than Unsecured loan thus saving money on interest.

2n
What is bank's benefit ?

Bank get collateral which lowers their risk (than unsecured loan) so if company fails to pay or any adverse situation arises, banks can sell the shares & recover money.

Margin -> Loan amount lent < Market price of shares pledged & act as security.

3n
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