Promoters of as many as 125 big and small companies have pledged over 75% of their holdings, according to the latest data available with the exchanges. 

As these are offered as either collateral for some financial accommodation or to raise funds in their personal capacity, any further fall in the value of shares thus pledged, makes them vulnerable.

In the case of 15 companies, including Tata Coffee , Gujarat Pipavav Port , Kingfisher Airlines and Tuticorin Alkalies , promoters have pledged their entire stake in the company with financiers to raise funds.

Other prominent companies in which promoters have pledged significant stake with financiers include Gujarat NRE Coke (along with DVR shares), Essar Oil , Dunlop India , Bilcare , Sakthi Sugars , United Spirits , Orchid Chemicals , Uflex and Kouton Retails . Mr Arun Kejriwal of KRIS Securities said that the degree of vulnerability depends on the institutions with which promoters have pledged their shares. 

He said if the shares are pledged with banks, then they would not face much pressure, as banks generally offer time to promoters to put up additional collateral. 

In that case, the promoters could bring in other assets as collateral. 

However, if the shares are pledged with non-banking finance companies or other entities, promoters may not enjoy much latitude. 

There is a high possibility that the shares may be put on the block if the promoters either fail to put up additional securities or redeem a portion of their loan immediately. 

The lenders might simply offload the stake in the market should the share prices fall below their threshold limits. 

Going forward, retail investors have to take this as a critical input for their investment decision. 

They have to be extremely careful about small companies because the sustainability power of large companies for margin calls is relatively better,said Mr Jagannadham Thunuguntla, Head of Research and Chief Strategist with SMC Global Securities.

A lot of the promoter funding is done by NBFCs, which have an appetite for high risk funding at high interest rates. Their own cost of funding has gone up after the rate hikes, and promoters' ability to pay back borrowed money is under question, resulting in a sell-off in many cases,� said a research report from Swastika Investmart.

Orchid Chemicals case

It may be recalled that in 2008, Mr Raghavendra Rao, Managing Director of Orchid Chemicals and Pharmaceuticals, saw shares pledged by him with Indiabulls Financial Services and Religare Enterprises flooding the market when the company's share price fell and he could not put up additional collateral security in time. 

The promoters had borrowed to increase their stake in the company.

Great Offshore case

While the takeover threat was averted in the case of Orchid Chemicals, Great Offshore, a company once owned by Mr Vijay Sheth and his associates, saw a management restructuring resulting in his eventually losing control after he failed to redeem the pledge. 

The promoters' stake ended up in the hands of Bharati Shipyard, which acquired management control over the operations of the company.

In all, about 900 companies' promoters have pledged their stake, but half of them have pledged less than 25% of their shares.