Peregrine Capital knocked at FIs' doors to offload underlying shares
Nalini D'Souza
MUMBAI, January 13: Fearing the likelihood of Peregrine Investments facing liquidity problems overseas and its subsequent impact on India, Peregrine Capital India had reportedly approached domestic financial institutions (FIs) to pick up the underlying stocks accumulated by its overseas corporate bodies (OCBs) in the form of participatory notes. It is learnt that Unit Trust of India (UTI) was approached by the FII last week to buy out stocks worth Rs 15-20 crore.However, UTI executive director Basudeb Sen said they have not entered into any such deal with the FII so far. "Unless there is a direct talk between UTI and Peregrine, such a deal cannot be entered into, moreover, we have not even received any proposal from the FII for the same," commented Sen. However, with Peregrine Investments applying for liquidation on Monday, any such deal will now have to be initiated by the official liquidator - Price Waterhouse, sources said. Meanwhile, there are rumours in the market that Jardine Matheson is also
facing problems and it has decided to pick up a considerable portion of participatory notes (PNs) on its account, sources said. A section of the market participants maintains that with UTI absorbing the sales dumped by FIIs in the open market, it could play saviour in the Peregrine case as well by entering into a deal with it and buying out the underlying stocks issued in the form of participatory notes in the last quarter of 1997. Such a move will be beneficial to UTI which will be able to pick up the stock at a discount to the market price and also help revive investor confidence, they added. "India's premier institution stepping in to purchase this huge block of stocks would help prevent another major chaos in the market," commented a BSE broker. "Perhaps that is the reason as to why they abstained from making any direct market purchases during the past two days when the indices collapsed by over 5 per cent," he added. According to market sources, Peregrine Securities had made huge positions roughly
estimated at $150-200 million in stocks like ITC, SBI, Reliance, BHEL and Thermax via the participatory notes channel. This figure is way ahead of the total exposure made by the brokerage house in the Indian equity market, which is rumoured to be in the range of Rs 450 to Rs 600 million. Peregrine invested most of the foreign funds in India through participatory notes issued by foreign individual investors to its OCB. A Participatory note (PN) is considered to be a vehicle which allows a foreign investor to hedge his risk against the exposure he expects in a particular country.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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