Categories
Observations

A warning sign that something is rotten

While researching for my Investor Wisdom newsletter,I came across an interesting fact.

If the shareholding pattern of a company has many banks or brokerages, it implies that something rotten is happening.Banks/Brokerages become large shareholders when the company is unable to meet its debt obligations and a part of the debt is converted into equity.

Exhibit one of this phenomenon is GTL.Consider its shareholding pattern as on 31 March, 2013

Bank # of Shares %
BANK OF INDIA 5760424 3.67
ANDHRA BANK 4787185 3.05
PUNJAB NATIONAL BANK 4045570 2.58
IDBI BANK LIMITED 3317412 2.11
CANARA BANK 3296275 2.1
UNION BANK OF INDIA 2769496 1.76
DENA BANK 2741555 1.75
VIJAYA BANK 2654910 1.69
INDIAN OVERSEAS BANK 2433199 1.55
UCO BANK 1854519 1.18
BANK OF BARODA 1684550 1.07
SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA 1649828 1.05
INDIAN BANK 1639016 1.04

Banks altogether hold around 24.6% of the company !

Prashant made a great observation-There is not a single private bank to keep the PSU banks company !

One reply on “A warning sign that something is rotten”

Leave a Reply

Your email address will not be published. Required fields are marked *