Rally triggers pref issues, 15 offers hit market in Dec

The current rally in the stock markets has prompted several companies to come out with preferential issues.

In December 2003 alone, 15 companies have either announced plans to issue shares on a preferential basis or have allotted shares at lower-than-market prices on a preferential basis.

These companies are planning to issue 62.09 million equity shares to promoters and other parties.

The companies which have announced preferential issues recently include Aurobindo Pharma, FCI OEN Connectors, Jain Irrigations, LIC Housing Finance, NRC, Television Eighteen and Vintage Cards.

In most of the cases, the shares are being allotted to the promoters at a price below the market price.

During the October-December 2003 quarter, 33 companies sent notices to the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) announcing plans to make preferential issues, while 10 firms allotted shares to the promoters and other bodies.

Tata Finance as allotted 6.03 crore equity shares to Tata Sons and 5.28 crore shares to Tata Industries at Rs 26.53 per share during October 2003.

The shares are now traded at Rs 59.25, a 123 per cent premium to the issue price. Jain Irrigation allotted 9.87 lakh shares to Aqua India I and Aqua India II on a preferential basis.

K Sera Sera Production's board of directors met on January 1 to consider the allotment of 15 lakh equity shares to Sahara India Mass Communication, 10 lakh shares to foreign institutional investors (FIIs), mutual funds and another 8.50 lakh shares to non-resident Indians and others.

LIC Housing Finance is considering a proposal to issue equity shares to financial institutions, FIIs and private firms on a preferential basis.

Matrix Laboratories recently announced that the company will issue 2.25 million shares to the US-based Newbridge Capital and other strategic investors at Rs 1,500 per share as against the ruling market price of Rs 1,695.45 per share on the BSE.

Few companies allotted debentures and warrants that would be converted into equity shares on a later date.

Delton Cables, Jain Studios, Malwa Cotton, Omax Autos and Strides Arcolab proposed to issue convertible warrants into equity shares, while Veronica Lab's is considering a proposal to issue fully convertible debentures.