New Delhi, June 22: Thanks to the turmoil in the stock markets, Welspun Syntex's Rs 43-crore public issue of FCD/OCCPs has devolved on the underwriters. According to the lead manager to the issue, IFCI Financial Services, the retail response to the issue has been almost negligible with only 74 applications coming in. The poor retail response has forced the Underwriters to bail out the issue.The Rs 43-crore issue had been underwritten by the lead manager, IFCI, IDBI, UTI and LIC to the tune of Rs 37.6 crore - IFCI Financial Services (Rs 25 crore), IFCI (Rs 19.85 crore), IDBI (Rs 10 crore), LIC (Rs 2.5 crore) and UTI (Rs 5 crore).
The firm allotees have already brought in the money to the tune of Rs 6 crore -- The Oriental Insurance Company Ltd (Rs 30 lakh FCDs and Rs 20 lakh OCCPs), Punjab & Sind Bank Ltd (Rs 40 lakh FCDs), SBI (Rs 3 crore OCCPs), United India Insurance (Rs 50 lakh FCDs), The New India Assurance (Rs 50 lakh) and General Insurance Corporation of India (Rs 50 lakh).
Besides the bad marketconditions, the poor retail response to FCD/OCCPs has been due to the heavy equity dilution after the conversion of warrants and cost-overrun in its ongoing project. The coupon on debentures at 17.5 per cent is attractive. The company is already facing a cost-overrun of Rs 27 crore.
Apart from the public issue, the promoters of Welspun Syntex, friends and relatives have subscribed to OCCPs worth Rs 30-crore. A member of the Welspun group, the company has tapped the public for part financing its ongoing project for setting up facilities for manufacturing specialty polyester filament yarn (PFY) with a total capacity of 19300 mtpa and expanding its polyester yarn texturising capacity by 4250 mtpa at a total cost of Rs 186 crore. The project is being part financed through a rupee loan of Rs 55 crore and Rs 47.5 crore as foreign currency loan from IFCI, Rs 6.35 crore from lease assistance and Rs 5 crore as unsecured loan from the promoters.
FCDs with a coupon of 17.5 per cent will be converted into equityshares between 9 and 12 months from the date of allotment. At the option of the investors, OCCPs will be converted into equity shares after the end of 24 months from the date of allotment and before the end of 59 months.
The conversion price will be determined by taking 70 per cent of the average BSE closing price of the stock prior to three months from the conversion date. FCDs and OCCPs have a cap price of Rs 20 and a floor price of Rs 10. However, at both these prices, the conversion will result in a massive jump in equity which will dilute future earnings.
At the minimum conversion price, the equity will jump from Rs 6.3 crore to Rs 79 crore.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
