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Jai Kumar NR
New Delhi, Sept 16: The promoters of Ashapura Minechem could possibly have the cake and eat it too. They have complied with the Sebi requirement of diluting their stake and at the same time have ensured that investors are kept at bay. The trick is: make an offer for sale to the public at a hefty premium to the current market price.
The promoters of Ashapura Minechem are offering 12 lakh shares at Rs 170 a share which is way above the current market price of Rs 72 on the Bombay Stock Exchange, thus ensuring their stake does not go down in the company. Interestingly, the equity shares have been priced even higher than the all-time high of Rs 165.
As the promoters of Ashapura Minechem have taken their stake to as high as 78.5 per cent, the floating stock has come down below the mandatory 25 per cent. In order to bring down the promoters' stake to 58.55 per cent, Sebi asked the company to divest their stake, in line with the market regulator's norms.
Although the company is complying with Rule 19(2)(b) ofthe Securities Contract (Regulations), 1957, there will be hardly any investors who will put their money. By making the offer at a very high premium of as high as 136 per cent to the current market price of Rs 72, Ashapuram Minechem has ensured that no investor puts money in the issue as well as do not violate the Sebi order.
Says a company source, ``Sebi has forced us to make an offer for sale even in this volatile market. Since the share is trading at a very low price mainly due to bad market condition, promoters as well as shareholders will be losing their investment value if we make the offer at a very low price. If the offer price is attractive enough to get full subscription, the floating stock will see a considerable jump and hence, shareholder value in terms of market price is bound to go down.''
According to the source, even if the promoters' stake remains the same due to poor investor response, this does not call for an action against the company. ``Since we are technically complying with theSebi jurisdiction, we should not face any action from Sebi even if the promoters' stake remains at the current level. As the price is very high at Rs 170, there may not be any subscribers for this issue,'' says the source.
The Rs 20.4 crore offer for sale is being made by Navnitlal R Shah, Chetan N Shah, Hiralaxmi R Shah, Himani C Shah and Chaitali C Shah. Post-offer, the public stake is expected to go up to 41.45 per cent, if all the shares are picked up by the public.
Against the offer price of Rs 170, the company has a bookvalue of only Rs 51.96 as on March 31, 1998. The 1998-earnings discount the offer price by a multiple of as high as 13 times. The company's return on networth has been falling continuously from 30.74 per cent in fiscal 1995-96 to 25.1 per cent in fiscal 1997-98. The Ashapura Minechem counter on BSE is not very active. Although the share is regularly traded, the volume is very low. The shares are listed at Mumbai, Ahmedabad, Delhi, Chennai and NSE.
A recognised export house, thecompany is into the manufacture, processing and marketing of bentonite products. The company has recorded a total income of Rs 77.57 crore for fiscal 1998 against Rs 66.79 crore during fiscal 1997. The net profit increased to Rs 8.15 crore from Rs 7 crore in fiscal 1997. Lead managed by BoI Finance, the offer for sale opens on September 28 and issue closes on October 12.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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