Windfall for Jindal Poly promoters

Indian promoters have proved that they are not behind others in wealth creation. Here8217;s another example of an Indian promoter making a ...

Indian promoters have proved that they are not behind others in wealth creation. Here8217;s another example of an Indian promoter making a bonanza just weeks before the launching of its public offering.

On March 22, 2005, less than three months before the launch of its public offering, Jindal Poly Films converted preference shares at a discount of Rs 10. Promoters got 49.38 lakh shares after the conversion. The company launched its offer at a price band of Rs 360-400 on June 9.

At the current market price of Rs 485, the promoters have made a profit of Rs 236 crore as the conversion was done at a huge discount of Rs 10. Incidentally, the preference share conversion was one of the risk factors of the public issue.

The company also converted another set of preference shares at Rs 360 on February 11, 2005 in favour of DEG. The total number of shares converted from preference shares to equity shares 8212; including DEG, promoters and others 8212; works out to 74.22 lakh shares.

JM Morgan Stanley, a lead manager, clarified the company8217;s move. 8220;The conversion of preferential shares by the promoters was as per a scheme of amalgamation of three companies way back in 1995 and another two India Polyfilms and Patil Products in 2000. The scheme was duly approved by High Court. The two acquisitions in 2000 were priced around Rs 360 per share,8221; said a JM Morgan official.

After the conversion, the promoter holding has risen above the stipulated 75 per cent level to 78.48 per cent. The BSE instructed the company to certify that the proposed allotment did not violate Clause 40 A of the Listing Agreement and to undertake that 25 per cent of the newly issued capital would be kept locked in for three years from the date of its listing with BSE as per its norms for the merger of unlisted entities with a listed company.

As per the offer document, the company said after share allotment, but before applying for trading nod, it will either file the Draft Red Herring Prospectus for a follow-on public offer or reduce the promoter holding to less than 75 of the fully diluted share capital. If the public offer does not materialise after filing the prospectus, the promoters8217; holding will fall below 75 via other means, including divestment.