How funding against shares works in principle, and the obligations a pledgor should understand.
Funding against shares lets a shareholder raise money without selling the holding. The shares are pledged as collateral for the facility and released when the obligations are met.
What decides eligibility
The type of security and whether the lender accepts it
Valuation and how easily the security can be traded
Existing pledges or other encumbrances
The borrower's profile and the purpose of funds
Margin and price movement
The value of pledged shares moves with the market. Facilities usually require a margin to be maintained. If prices fall, the borrower may need to add security or reduce the outstanding amount. Anyone considering this route should plan for that.
Regulation and disclosure
Pledges of listed shares, especially by promoters, carry disclosure and regulatory requirements. Take independent legal and financial advice before proceeding. This article is general information only.
This article is general information and not financial, legal or investment advice.
