The banks have taken a opposite view to that of financial institutions which have okayed the proposal allowing the promoters to convert 75 per cent and other 30 per cent of the cumulative convertible preference shares into equity. The conversion will have allowed the promoters to up their stake from 30 per cent to 40 per cent.

Banks have objected to the proposal by saying that they do not see any merit in "discriminatory conversion" as opposed to a BIFR proposal of permitting the conversion of all cumulative convertible preference shares into equity, institutional sources said. The BIFR proposal will enable the banks and financial institutions increase their stake from 40 to 50 percent.

Banks also said that discarding a BIFR proposal is fraught with dangers and if a company goes to BIFR it should abide by what the agency says.

As per the BIFR proposal, outstanding CCPS should be converted into equity at Rs 40 per share or at 25 per cent discount to the average preceding six months' price, whichever is lower, during the period between January 1 and September 30, 1998. The company is implementing the BIFR proposal before November 30.

The company has asked the banks and financial institutions not to exercise the conversion clause and switch over to redeemable preference shares as it will dilute the share value. It has also suggested that the banks and institutions avoid a huge 50 per cent stake in the expanded equity in the larger interests of the company's scrip.

Zenith, engaged in the manufacture of H-acid, cutting tools, steel pipes and yarns, had made a marginal recovery recently after being under the BIFR fold for a few years.

However, the company is now find the goingtough owing to falling global prices for dye intermediates. The global prices for H-acid is now at $3.2 per kg as against $5 per kg last year.

Declining global prices had a negative effect on the company's profitability for the second quarter of the current financial year.