Bengaluru: Nearly a third of the shares held by Zetwerk’s founders and promoter group have been pledged against borrowings, with part of the arrangement set to remain in place even after the manufacturing company’s proposed IPO.According to Zetwerk’s updated draft prospectus, around 10.2 crore shares, or 32.18% of the combined holding of the promoters and promoter group, were pledged as security for borrowings. The pledged shares represent about 6.6% of Zetwerk’s total pre-IPO equity on a fully diluted basis.In simple terms, the shares have been offered as collateral to lenders. The promoters continue to own the shares, but if the borrowing terms are breached and lenders enforce the security, the shares could be taken over or sold, potentially reducing the promoters’ stake in the company.Zetwerk has flagged this as a risk for investors. The company said enforcement of the security could dilute the promoters’ shareholding and potentially affect its business and share price.Founders Amrit Acharya and Srinath Ramakkrushnan directly hold shares representing about 1.8% of Zetwerk that are pledged against borrowings. Another 4.8% is held by members of the promoter group and Creovate Innovation, a company controlled by the founders. The pledges were created in Sept last year in favour of Catalyst Trusteeship, acting as trustee for the lenders.The pledge is now being partly unwound as Zetwerk prepares for its listing.Some shares have already been released to meet the minimum promoter holding requirement after the IPO. The trustee has also agreed to release shares held by Acharya, Ramakkrushnan and Creovate that are proposed to be sold through the IPO’s offer-for-sale component. Other shares will be released so they can be locked in for the period mandated under Sebi rules.The arrangement, however, will not disappear entirely after the listing. Zetwerk’s prospectus says some promoter-group shares remaining after accounting for the IPO sale and mandatory lock-in will continue to be pledged.Ahead of the IPO, Ramakkrushnan owns 8.3% of Zetwerk on a fully diluted basis, while Acharya owns 7.5%. The promoter and promoter group together hold 20.7% of the company.Zetwerk’s IPO comprises a fresh issue of up to Rs 2,600 crore and an offer for sale of up to 9.6 crore shares by founders, investors and other shareholders.
