Pledge Shares to Raise Cash:

In a recession market, Cash is King. And those companies caught in middle of project would be desperately needing cash at any cost.

One of the easiest way to generate cash is pledging promoters shares and taking a Loan against securites. In a bull market, this strategy would work. But in a bear market, when market falls, the valuation of stock would fall forcing the lender ( often the bank's ) to squeeze the promoters to pay back cash or sell the shares. Though there could have been bitter episodes of such instances , promoters often commit the same mistakes again and again.

Companies like TATA Cofee, though have taken a loan by pledging all the promotes shares, the lineage of promoter could give some comfort level. But companies like Kingfisher airlines are under high risk if bankers liquidate promoters holdings.