The Anil Ambani group of companies led by RCom have been facing a severe crisis of late which includes massive amounts of debt and loss in market capitalisation. Amidst this crisis, the group companies have pledged promoter shares to financial institutions in order to raise funds. However, such loans require a minimum of 50% margin and once the market price of shares falls, the promoter must pledge further shares to replenish the margin. Once the promoter does not have further shares to pledge, the company is at a dead end. This is exactly what happened and the lenders with whom shares were pledged, started selling those shares in order to protect their investment. The Anil Ambani group sued them, but the Supreme Court did not entertain its plea and then the ADAG Group was forced to settle. The firesale of pledged shares are harmful as retail shareholders are the ones to suffer; hence we list down a few pointers which can be followed in the event of such a sale of pledged promoter shares.
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