Promoters Now More Alert On Pledging Shares: SEBI Chief Ajay Tyagi

Promoters are now more alert on pledged shares as they are sceptical that control may go to someone else, SEBI’s Ajay Tyagi says.

Ajay Tyagi, chairman of Securities and Exchange Board of India. (Photo: PTI)
Ajay Tyagi, chairman of Securities and Exchange Board of India. (Photo: PTI)

Promoters of listed companies have become more alert on pledging of shares, the chief of India’s capital markets regulator said on Monday.

"Promoters are now more alert as they are skeptical that control (of their companies) might go to someone else...," Ajay Tyagi, chairman of Securities and Exchange Board of India, said at an event in Mumbai.

Putting restrictions or banning pledging of shares beyond a certain percentage may not be a very good idea since these shares are properties of the promoters, he said, adding that SEBI has put in place various disclosure requirements with respect to pledging of shares by promoters of listed companies.

His comments come against the backdrop of rising instances of promoters' pledging their shares in companies to raise funds.

Prompt Action

Tyagi at the event also dwelt on crises at several companies in the financial sector. Such things affect trust of investors but that does not mean everything is wrong, he said.

"Whatever improvement is required, we are doing it quite quickly...whatever is in SEBI's domain," Tyagi said, referring to action taken in the case of Karvy Stock Broking Ltd.

When asked whether troubles at Dewan Housing FInance Corporation Ltd., Karvy and IL&FS Group have affected investors' trust, Tyagi said "definitely such things affect the trust but that does not mean everything is bad or everything is wrong".

"Karvy was in our domain. We did very promptly. We are trying to improve on rating agencies side...and on bond market development," he said.

Debt Market

The Insolvency and Bankruptcy Code will have a positive impact on the domestic corporate debt market in five years, he added.

Describing IBC as a "landmark reform" in the country's economic history, Tyagi said the Code has brought in behavioural changes among corporate debtors. The code came into force in December 2016.