The pledge ratio is the proportion of a promoter's shareholding that has been pledged as collateral to lenders in exchange for loans. A promoter who has pledged 60% of their shares has borrowed heavily against their equity stake.
Pledge Ratio = Pledged Shares ÷ Total Promoter Shares × 100
Why it is a risk signal
When a pledged share drops in price below the loan value, the lender can force-sell the pledged shares (margin call) to recover the loan. This creates sudden selling pressure that can cascade: the force-sale drops the price further, triggering more margin calls. This "pledge unwind" dynamic has hurt shareholders in many Indian companies.
For promoters, a high pledge often means personal financial stress — they have borrowed against their stake rather than selling shares openly. It can also indicate that the company itself isn't generating enough cash for the promoter.
Why it matters for unlisted shares
Unlisted companies are not required to disclose pledges as often as listed companies, but pledge data may appear in a DRHP or indirectly via registrar filings. A high pledge ratio is one of the most reliable early-warning signals of promoter stress.
Example: A promoter with 60% stake pledged at 80% coverage had to absorb a margin call when the valuation fell — triggering forced sales that spooked secondary buyers.