Sorry I haven’t been active here guys. I am building some stuff on and off as I find time but I have several exciting things competing for time so this has become an abandoned child for over a year now.
To kick things off, here is some analysis I did for Future group companies. This is about Promoter pledging in general. Here is Future group companies’ Promoter shareholding pledge movement over the last few years. There are 6 businesses in this group being traded although they are all in complementary lines of business. That in itself should be a red flag. The only reason why someone would do this is playing the market aka value-unlocking.
Here’s a look at the pledging in all of them
Future Consumer - Market cap was around 15k Cr at peak. Currently around 1600 Cr. Looks like the collateral was reduced through release of pledge shares from 57% to 25% post demonetization rally where price moved 4x in a year. Although pledged was cut by half in Mar '17, it soon went back to old levels by end of year once the price was pumped up. So probably higher debt was taken (wonder who lent) with the backing of the higher market cap. So essentially the promoter was able to cash out a few hundred crores (25% of promoter holding → 10% of overall outstanding shares → 1500 Cr worth at peak → assuming about 50% of this value was taken out - that’s about 750 Cr? Calculations are strictly back of the envelope and indicative to see how this game might be played.
Now pledging has reached 90% levels - probably increase in collateral to support falling price. But what is it actually worth even?
Interesting to note that the business reached roaring growth in PnL in FY18 through today although cash flows showed nothing was well here. You couldn’t have missed the corporate videos and PR that happened to Future group companies in FY18 either.
Same story here, release of pledged shares as price increased, only to re-pledge and suck out whatever was possible and then increase collateral with share price plunge. Market cap was 2500 Cr at peak. About 400 Cr today. Bulk of the fiction cashed out via pledge.
30k Cr at peak! 4k odd Cr today. Probably few thousand Crores cashed out of here. Release and re-pledge and increase collateral.
7500 Cr at peak, 2500 Cr odd market cap today. Strange how the pledging went through the roof suddenly last year when the price was still holding up.
1000 Cr to 50 Cr saga. Same playbook - Lather, Rinse, Repeat
No pledge here until couple of quarters back. Was probably de-merged from one of the other businesses at peak in the name of value-unlocking. Sudden jump in pledging - not by 10 or 20% by a whopping 97%.
Its high time we are wary of this playbook as this has been played in multiple businesses over the years.
)