Emami: It's ‘Payback' Time

The Kolkata-headquartered group is working on a strategy to repay debt raised for other businesses, while trying to bring down pledged promoter holdings in its FMCG company.

- Debojyoti Ghosh

VENTURE

THE PROMOTERS OF the Emami Group are working on a two-pronged strategy: One, they are trying to bring down the debt raised to fund new businesses by selling a 10% stake in its flagship listed entity Emami Limited. And two, they are trying to bring down the percentage of pledged promoter holdings in their Kolkata-headquartered consumer goods firm.

At present, the level of promoter-pledged shares in Emami Ltd is 47.6%, which is “extremely high” according to analysts who say that the company is attempting to bring it down to 30-36% in the medium term.

Typically, promoters pledge shares to secure loans for working capital needs or to fund other businesses. It can be bothersome for companies as they need to maintain the value of the collateral (promoter shareholding) used to secure a loan, or else provide additional shares if the value erodes.

“Nearing 50% [of pledged shares] is not a comfortable level and the management would need to take necessary steps and they are already working on it. Typically anything beyond 25-30% of pledged shares leads to an unpleasant situation for a company,” Abneesh Roy, senior vice president, Edelweiss Securities, tells Fortune India.