NEW DELHI, July 1: The depressed share price of Birla Global Finance, an Aditya Birla group company, has thrown the conversion of the optionally convertible debentures (OCD) out of gear. The non-banking finance company will have to shell out a total of Rs 40 crore as none of the investors are expected to opt for conversion of Part B of the OCD.

Of this liability, Rs 27 crore is on account of the redemption of Part B of the OCD, while the balance is the interest of 18 per cent payable thereon on the debentures.

Says Adesh Gupta, joint president, Birla Global Finance, ``In view of the market conditions, there is no conversion of Part B. The total value of Part B is Rs 27 crore, 100 per cent of which is liable for redemption. If you include the interest of 18 per cent, our total liability on account of redemption of Part B works out to around Rs 37-38 crore.''

According to the terms of the offer document, Part A of OCD was compulsorily converted into one equity share of Rs 10 at a premium of Rs 17.50 on allotment. Part B was to be converted into one equity share of Rs 10 at the option of the debenture holder.

Between September and December 1996, the conversion price was Rs 35; between January and March 1997, the conversion price was Rs 40; between April and June 1997, the conversion price was Rs 42.50 and; between July and September the conversion price is Rs 45.

Considering the share price since the issue had never crossed Rs 30.50, investors are likely to opt for redemption of the OCD especially as the interest rate is an attractive 18 per cent. The redemption will be early next year -- the record date is March 18, 1998.

The Aditya Birla group company had offered 6,748,605 OCDs of Rs 67.50 each to its existing shareholders in the ratio of three debentures for every four equity shares. At the time of the issue, the share price was marginally higher than the conversion price of Part B. After hovering around Rs 22-30 in September-November 1996, the scrip touched an all-time low of Rs 16.05 on December 16, 1996.

The new year brought good news as the scrip inched its way up to Rs 30.50. However, since then the scrip has been falling steadily and currently trades near its 52-week low of Rs 17.50.

Company officials are now resigned to the fact that no investor will convert Part B of the OCD and are making plans to meet the liability. ``We realise that if market conditions do not improve, Part B of the debentures may have to be redeemed fully and are accordingly raising alternative resources which interalia include privately placed debentures, fixed deposit and ECBs.

In fact, we are in a position to buy back or redeem outstanding debentures even before the due date,'' says Gupta.

With NBFCs in the spotlight, their scrips are trading at very low levels and are unlikely to flare up in the near future. If Birla Global wants to avoid the liability of around Rs 37-40 crore, the scrip will have to move up by more than 150 per cent by September 30, the last date for converting Part B of the debenture.

In the first-half of fiscal 1996-97, Birla Global Finance's operating income stod at Rs 37.9 crore compared with Rs 28.58 crore in the corresponding period of the previous fiscal.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.