NEW DELHI, March 16: With the warrant conversion date fast approaching, investors have shunned the Reliance Petroleum warrants in the markets. There are hardly any takers as there will be no exit option till warrants are converted into equity, which is likely to take atleast four-five months.The warrants have witnessed a free fall and lost more than 60 per cent in the past few sessions from Rs 4.5 to Rs 2.3 on Monday and attracted a seller freeze at this level. A sell order to the tune of around 1.5 lakh warrants was pending at this level on the NSE while volumes surged to over 17.8 lakh . Moving in tandem, Reliance Petroleum scrip dropped substantially from the intraday high of Rs 23.7 to Rs 21.9 on Monday.
The compay has already fixed April 25 as the record date for excercising the warrant conversion option and the warrants would cease to trade on the bourses from the first week of April.
Meanwhile, a new option has been attached to the triple optionally convertible debenture (TOCD). This has madeTOCD an attractive bet and attraced heavy buying interest on Monday. The price of TOCD shot up to around Rs 54.5 from the previous close of just over Rs 49. The volumes too surged to over 4 lakh on NSE.
The holders now have an option to convert the TOCD into three equity shares. The first share will be convertible in November 1999 at par; second and third into equity at Rs 15 each (premium Rs 5) in November 2000 and November 2001.
The investors, who earlier preferred warrants to equity, have now shunned the warrants. The reason: price of warrants plus the conversion price of Rs 20 would work out to be higher than equity and is thus less attractive.
Also, the waiting period to actually receive an equity share is more than three-four months. The company has fixed April 25 as the record date for excersiing the warrant conversion option. The actual offer to apply for equity at Rs 20 would come the investor's way only in May and equity shares would be received in June-July. As a result, the investor wouldhave no exit route for atleast four months.
On the other hand, the equity is going at a slightly higher price of Rs 22.8, but the investor will always have an easy exit option at any opportune time. Heavy selling by mutual funds was also witnessed in the case of both equity and warrants in the past few sessions, which triggered the selling wave in the counter. However, a few funds have also shown interest at the current levels and have reportedly picked up huge chunks.
Reliance Petroleum's scrip, which found investor's fancy in the past few months has been hit hard in the past five sessions. The scrip too has lost more than 14 per cent from a high of Rs 25 a few weeks ago to around Rs 21.50 on Monday.
The freely tradable warrants, issued along with the TOCD, have been the worst hit and witnessed a free fall in the past few trading sessions. The warrant peaked at Rs 5.8 in January this year and now trades at Rs 2.2.Meanwhile, Reliance Petroleum has taken a tough stand to forfeit the shares and amountalready paid by the TOCD holders in case they fail to pay the call money.
The company has fixed March 16 as the last date for the payment of the call money for its shares and TOCDs. The company issued about 45.82 crore TOCDs in 1993 at a price of Rs 60, which were partially converted into two equity shares of Rs 10 each at par. The non convertible portion of TOCD was priced at Rs 40. The TOCD also carried two freely tradeable warrants which would entitle the holder to subscribe to equity share at a price of Rs 20.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
