Adani Group plans to prepay ₹7000-8000 cr worth of loans in up to 45 days
06 Feb 2023
Zinkpot
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Mint - Adani Group, led by Gautam Adani, is looking to prepay its debt of ₹7000-8000 crore from its loans against shares (LAS) portfolio to ally fears. The conglomerate aims to reduce its LAS exposure with effect immediately and bring it to zero in 30-45 days. According to the report, a formal decision may be taken as early as today. Read more
What is loan against shares? Loan against shares or loan against securities is a process through which one can avail a loan by pledging their shares as collateral. A loan against shares requires no collateral or additional securities apart from the shares already in one's demat account.
Loan against securities are typically offered as an overdraft facility in one's account after they have deposited their securities. One can draw money from the account and pay interest only on the amount one uses and for the period it is used.
While the Demat shares are pledged as security for the loan, one still continues to receive the various benefits of share investments. This includes receiving and retaining not only the dividends, but also one's due bonuses and rights.
Shares can be pledged to avail a loan amounting to ₹20 lakhs.
Loan against shares is often cheaper than personal loans and offer interest rates in the range of 12 to 18% p.a.
Loan against shares is a convenient option, but it is important to utilise these funds responsibly and cautiously. Some investors avail loans against shares only to reinvest the money back into the market. However, if the market goes into a bearish trend, this move can result in considerable losses, as they will still have have to pay the interest to the financial institution.
Therefore, it is recommended to avoid this strategy. Instead, it is best to utilise the loan amount for financial emergencies or to meet financial goals soon. This can include covering expenses for household, wedding, education and capital for business investments.
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