Sun Pharma created a pledge of 51.3 lakh equity shares on June 30, 2023, in

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favour of Tata Capital Financial Services, the lender. This is as a security for a loan obtained by the company.

The promoters have a shareholding of 54.48 percent. Some large promoters of the company are Dilip Shanghvi with 9.6 percent shareholding, Shanghvi Finance Private Limited with 40.3 percent shareholding, AdityaMedisales Limited with 1.67 percent shareholding.

Pledging of shares in simple terms means taking a loan against the securities you own. It is a popular way of raising capital for individuals and companies, to meet their working capital requirements, clear existing debt, etc. A share pledge means taking a loan against the shares in possession.

While pledging shares, promoters retain their ownership. However, as the share price keeps fluctuating, the value of the collateral also changes.

Share pledge can be troublesome for companies at times, as promoters are required to maintain the value of the collateral all the time by providing additional shares to lenders when their value erodes.

In case promoters fail to make up for the difference, lenders can sell the shares in the open market to recover the money. This can lead to a reduction in the promoters’ shareholding in the company, further value erosion in the stock due to infusion of additional paper in the market, and even sudden change of guard in the company because of alteration in shareholding pattern.

The shares of Sun Pharma traded flat on NSE at Rs 1,035 at 11 am on July 4. Since start of 2023, the stock has gained just 4 percent, compared with Nifty 50 gaining 6 percent.