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”
With 24% stack now .. how many directors they have on board?