Reliance Infrastructure is likely to miss raising about Rs 7,834.6 crore through 4.3 million warrants it issued to its promoter group company AAA Project Ventures in January 2008.
The promoter group company may not convert the warrants into equity as the stock of the company was trading far below the Rs 1,822 conversion price. On Monday, the stock closed at Rs 710.65 on the Bombay Stock Exchange, nearly 61 per cent lower than the conversion price.
The warrants, if not converted, would expire on July 19.
“The promoters are likely to let the warrants lapse; they would not cancel it,” said a top executive of the Anil Dhirubhai Ambani Group company who did not wish to be quoted.
The company has Rs 10,000 crore cash and cash equivalents in its reserves and does not expect the non-conversion of warrants to affect its plans.
In the last three weeks, 12 companies, including Simplex Infrastructure, Jindal Saw, Jammu and Kashmir Bank, Asian Oilfield, Usha Martin and GTL Infrastructure, have informed the stock exchanges on the inability of the warrant holders to convert it.
| UNWARRANTED FUTURE List of companies whose warrants will expire in the next few months | ||||
| Warrants in million | Price in Rs | % fall | ||
| Issue | Apr 27, ‘09 | |||
| Reliance Infra | 43.00 | 1822.08 | 710.65 | 61.00 |
| Aditya Birla Nuvo | 20.50 | 2007.45 | 584.45 | 70.89 |
| Raymond | 6.14 | 340.00 | 89.75 | 73.60 |
| Infomedia18 | 6.00 | 237.00 | 73.90 | 68.82 |
| ABG Shipyard | 4.00 | 796.66 | 124.30 | 84.40 |
| Jupiter Bioscience | 4.00 | 182.28 | 44.95 | 75.34 |
| Ahmednagar Forg | 3.80 | 230.00 | 35.90 | 84.39 |
| Mudra Lifestyle | 3.00 | 120.00 | 19.59 | 83.68 |
| Bilpower | 2.00 | 350.00 | 109.60 | 68.69 |
| Ansal Housing | 1.70 | 208.00 | 29.45 | 85.84 |
During a bull market, warrant is a popular instrument for promoters to increase their stake in their companies. It is issued for a nominal commitment money and can be converted into an equity at a pre-decided price within a stipulated period of 18 months. Promoters expect the stock prices to go above the conversion price to benefit from the allotment.
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However, with the ongoing credit crunch and the following downturn in capital markets, the stocks of these companies are trading about 50 per cent down from the levels when the warrants were issued.
Last month, 18 companies such as Bombay Dying, Lloyd Electric and PVR had announced lapse of warrants allotted to promoters as well as non-promoters.
The stock of Aditya Birla Nuvo, which issued 20 million warrants to raise about Rs 4,114 crore, is trading at about 73 per cent discount to the conversion price of Rs 2,007 and the warrant is likely to lapse.
Raymond, ABG Shipyard and Infomedia18 are some other such companies whose warrants are due for conversion in the next two-three months period.
The stock market regulator, the Securities and Exchange Board of India (Sebi), has increased the commitment money to 25 per cent from 10 per cent to avoid lapses on the new warrants.
With inputs of Navin John & Deepak Korgaonkar