Hinduja Global Solutions shares tank 20% on likely promoter loan

Shares of Hinduja Global Solutions (HGS) crashed 20 per cent on Friday after the company hinted it may offer additional loans to the promoters after giving a Rs 500-crore loan to them.

The company had sold its health care business to Baring’s private equity fund in August last year for $1.2 billion (Rs 8,000 crore) and its shareholders were expecting a large dividend from the company. But its minority shareholders were left disappointed after the company announced on Thursday that it was offering only 150 per cent as special dividend to celebrate the deal, leading to a crash in its share price.

On Friday, the stock fell to Rs 2,855 a share, dragging its market valuation to Rs 5,967 crore. The promoters, the billionaire Hinduja family, own a 67.2 per cent stake in the company.

“The confidence of minority investors in the promoters is so low that investors believe that promoters will gobble up all the cash flows, apart from the Rs 300-crore dividend emanating from the sale,” said Shriram Subramanian, founder and MD of shareholders’ proxy advisory firm, InGovern. “Sebi (Securities and Exchange Board of India) needs to investigate whether the management was misdirecting investors in the conference calls,” he said.

The stock of the company, which is engaged in outsourcing, had hit a record high of Rs 3,948 on Tuesday after the company informed the stock exchanges of a board meeting to consider interim dividend and a proposal for bonus issue of equity shares.
In the past one month, the stock had rallied 24 per cent compared to a 5 per cent rise in the S&P BSE Sensex till Thursday.

In a disclosure to the stock exchanges on Thursday, the board recommended bonus shares in the proportion of one equity share for every one share held by the shareholders.

The company also announced that its board has approved the proposal to enhance the limits applicable for extending loans, making investments and providing guarantees or security of up to Rs 3,500 crore.

The company did not give any break-up of how it plans to extend the loans, citing “silent period”, thus spooking shareholders.