M&M skids as promoters pledge shares

Mahindra & Mahindra slipped 1.85% to Rs 315 at 15:22 IST on BSE, after the company said its promoters have pledged more than 2.09 crore or 8.09% stake in the company.


The company made this announcement during trading hours today, 16 February 2009.
Meanwhile, the BSE Sensex was down 332.11 points, or 3.45%, to 9,302.63.
On BSE, 2.92 lakh shares were traded in the counter. The stock had an average daily volume of 1.50 lakh shares in the past one quarter.
The stock hit a high of Rs 333 and a low of Rs 301.05 so far during the day. The stock hit a 52-week high of Rs 721 on 4 March 2008 and a 52-week low of Rs 235.50 on 3 December 2008.
The large-cap stock had underperformed the market over the past one month till 13 February 2009, gaining 5.71% as compared to the Sensex's return of 6.21%. It had also underperformed the market in the past one quarter, falling 6.21% as compared to the Sensex's return of 1.03%.
The company's current equity is Rs 258.57 crore. Face value per share is Rs 10.
The current price of Rs 315 discounts the company's Q3 December 2008 annualized EPS of Rs 0.19, by a PE multiple of 1657.89.
Promoters of the company have pledged more than 2.09 crore shares or 8.09% stake in the company. The company did not mention with whom the shares were pledged. The funds borrowed have been invested in the purchase of company's shares through secondary market by the entities through creeping acquisition.
The promoters' total shareholding in the company as on 31 December 2008 was 26.49%.
The issue of pledged shares has gained importance in the recent past after it was discovered that the entire promoter stake of the fraud-hit Satyam Computers was pledged with various financial institutions. Securities & Exchange Board of India (Sebi) has since made it mandatory for companies to disclose details related to pledge shares.
There are fears that the lenders may dump the pledged shares if the promoters fail to repay the loan.
The board of M&M had on 13 February 2009 approved to hive off the company's land systems business and naval systems business of Mahindra Defence Systems division to separate bodies corporate / companies.
M&M's total sales fell 21.06% to 17,611 units in January 2009 over January 2008.
M&M's net profit declined 99.7% to Rs 1.20 crore on 14.6% rise in net sales to Rs 2519.25 crore in Q3 December 2008 over Q3 December 2007.
Mahindra & Mahindra manufactures automobiles, farm equipment and automotive components. The company's automobile products include light, medium and heavy commercial vehicles, jeep type vehicles and passenger cars. Mahindra & Mahindra also manufactures agricultural tractors, agricultural implements, internal combustion engines, industrial petrol engines, spare parts and machine tools.