Good pledge vs Bad pledge .

In our stock selection first things we notice about management is that of pledge.
If there is a pledge on shares we dont proceed immediately but in case of no pledge we just jump to the next point.
Pledge could be for many reasons.
Like some companies dont want to take borrowing, and need immediate capital for operation so they initiate pledge.
After pledge of shares we closely have to monitor financial performance of the Company.
Suppose company pledge its shares and next quarter posted either flat results or bad results then we should be alert immediately.
Some promoters uses pledge proceeds for their own instead of business.
So pledge is not bad but its impact should be in financial performance.
Investor should consider that even after huge capital employment why company performance is not improving.
Since on moneycontrol each stock is called Multibagger. So be aware.
Like star paper and mangalam drug having pledge but their financial performance each quarter improving whether top line or bottom line and examples of good pledge .
While DQ entertainment promoter having pledge of 100 % but still making loss.
This is bad pledge and investors should be alerted when each quarter company posting bad results even after such huge capital employment in business.

Author: Atul Singh Stock Market Analyst

Disclaimer: This Blog, its owner, creator / contributor is not a research analyst and expressing opinion only as an individual investor in Indian equities. He/She is not responsible for any loss arising out of any information, post or opinion appearing on this blog. Investors are advised to consult financial consultant before acting on any such information. All information in this blog is posted for personal study, All information posted on blog is as available in public domain.

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