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Share-backed loans rock India's founder-led firms

Tighter credit, debt raise specter of defaults

The concern now is that more companies may find it difficult to repay debt leading to a vicious cycle of falling share prices and collateral values and further selling of pledged stock by creditors.   © Reuters

MUMBAI (NewsRise) -- As liquidity tightens, investors in India are grappling with the growing risk posed by founder-led companies that are laden with debt and have a high proportion of shares pledged as collateral for loans.

The latest case to unsettle the market concerns Reliance Anil Dhirubhai Ambani Group, which is led by Anil Ambani, younger brother of Asia's richest man, Mukesh. Over the course of four trading sessions early in February, the group's companies lost nearly 55% of their collective market capitalization as lenders L&T Finance and Edelweiss Group dumped pledged shares worth 4 billion rupees ($56 million).

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