What is a non-disposal undertaking (NDU)? SEBI rules

A non-disposal undertaking is a promise by a shareholder not to sell specified shares. No shares change hands, nothing is transferred to a lender, and for years that made it a quiet alternative to a formal pledge. SEBI closed that gap: a non-disposal undertaking is an encumbrance under the takeover code, so a promoter who gives one has to disclose it, and since the quarter ending 30 June 2025 it has its own column in the shareholding pattern. This page explains what an NDU is and where it shows up. It is not investment advice.

What does a non-disposal undertaking do?

A pledge and a non-disposal undertaking solve the same problem in different ways. Under a pledge, the promoter's shares are marked in favour of the lender in the depository system, and the lender can sell them on default. Under an NDU, the shares stay unmarked and fully with the promoter, who simply undertakes contractually not to dispose of them while the loan is outstanding.

For the lender an NDU is weaker: it produces a claim for breach of contract rather than a direct route to the shares. For the promoter it is lighter, and historically it was less visible. The two are compared line by line in pledge vs non-disposal undertaking.

When did SEBI make an NDU disclosable?

Regulation 28(3) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 used to define encumbrance as "a pledge, lien or any such transaction, by whatever name called". That wording left argument about anything structured differently.

The SAST (Second Amendment) Regulations, 2019, dated 29 July 2019, substituted it. Encumbrance now includes:

• any restriction on the free and marketable title to shares, by whatever name called, whether executed directly or indirectly
• pledge, lien, negative lien, non-disposal undertaking
• any covenant, transaction, condition or arrangement in the nature of encumbrance, by whatever name called, whether executed directly or indirectly

The reason was structural. Promoter group borrowings were being secured over shares of listed group companies through covenants and undertakings rather than pledges, so a real restriction on a promoter's holding sat outside the disclosure regime. Naming the negative lien and the NDU, and then adding a catch-all for anything in the nature of an encumbrance, removed the drafting workaround.

Where an NDU appears in public filings

Event disclosure. Under Regulation 31 of the SAST Regulations, a promoter must disclose the creation, invocation or release of an encumbrance to every stock exchange where the company is listed, within seven working days. Since the definition covers NDUs, giving one is a disclosable event in its own right. Many of these disclosures now reach the exchanges through system driven disclosures.

Quarterly shareholding pattern. This is the newer part. SEBI circular SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/35 dated 20 March 2025 modified the shareholding pattern formats prescribed under the LODR Master Circular of 11 November 2024. Tables I to IV now require the listed entity to disclose details of the non-disposal undertaking, other encumbrances if any, and the total number of shares pledged or otherwise encumbered including NDU. In Table I those sit as separate columns for pledged shares, non-disposal undertaking and other encumbrances, with a total encumbered column that adds the three together. The change came into force with effect from the quarter ending 30 June 2025.

One wrinkle worth knowing if you search for the term: the body of that circular writes the item as "Non-Disclosure Undertaking" at paragraph 3(a)(i), while the prescribed format tables read "Non Disposal Undertaking". The column in the actual filings is the non-disposal undertaking.

What this changed for anyone reading a shareholding pattern

Before the June 2025 quarter, the encumbrance line most readers looked at was the pledged figure, and a promoter whose shares were locked up by undertaking rather than pledge could show a nil pledge. Now the pattern reports pledged, NDU and other encumbrances separately, plus the combined total. A promoter with zero pledged shares and a large NDU column is a different picture from one with zero in every column, and until mid-2025 both looked the same in the quarterly file.

That makes the total encumbered figure the number to read alongside the promoter stake, rather than the pledge figure alone. The rest of the format, including the new fully diluted basis column added by the same circular, is covered in how to read a shareholding pattern, and the pledge mechanics in what is promoter pledging.

What an NDU does not tell you

A disclosed non-disposal undertaking records that shares are contractually locked, in whose favour, and from when. It does not record the size of the underlying loan, the interest rate, or the covenants that sit alongside it. And an NDU is a financing arrangement, not an event: promoters give them routinely as part of ordinary secured borrowing. The disclosed figure is a fact about the promoter's balance sheet, and the context around it is yours to weigh.

A non-disposal undertaking is now a named, dated, quarterly-reported item rather than a private contract, which is the whole point of the 2019 and 2025 changes. Flock reports public filings with every claim sourced and dated. What any of it means for your money is your call to make.