Promoter pledge

Shares owned by the promoter that have been given to lenders as collateral for a loan, usually a loan taken outside the listed company.

Measure the pledge as a share of the whole company, not of the promoter's stake. Say a promoter holds 62% and has pledged 45% of that holding. That's 27.9% of the entire equity, and it's the figure to carry.

Its mechanism makes it dangerous. If the share price falls, the lender demands more collateral. If the promoter can't provide it, the lender sells the pledged shares into an already falling market, which pushes the price down further and can trigger the next margin call. Minority holders are carried down by a chain of events they had no part in. It's a hard way to lose money.

It also distorts incentives. A promoter whose personal borrowing depends on the share price has a reason to support that price and to delay bad news, and that reason has nothing to do with running the business well.

Pledge levels are disclosed each quarter, so you can watch them move. A rising trend is among the strongest negative signals you'll find.

Compute it against the whole company.