Elbee Services

This deal was approved at the annual general meeting held in December 1997. This could lead to an equity dilution of a maximum of Rs 4.95 crore from the current level of Rs 6.71 crore and the Chatterji group's holding could increase to 45.25 per cent in Elbee Services.

Prospects of an open offer seem remote. Equity is being expanded through the preferential allotment route and the Chatterji group anyway holds a stake in Elbee Services. Moreover, Elbee Services has clearly stated that management control will continue to be in the hands of the existing promoter group as long as Elbee Services does not default on its commitments to the group. If the share price spurts as a result of these reports, the opportunity should be used to book profits.

The Chatterji group held a 46 per cent stake, Elbee Services 29.5 per cent and Elbee's promoter group 12.08 per cent in the equity capital of Elbee Airlines. The Chatterji group's desire to restructure and thereby increase its stake and involvement in Elbee Services stems from the high level of financial assistance given to the Elbee group. Its desire to have a bigger say in the running of the flagship company is only understandable, given the poor performance of the companies.

The Chatterji group's 46 per cent stake in Elbee Airlines is being repurchased by Elbee Services at Rs 20 (which is also the acquisition price) aggregating Rs 7.48 crore. This is being funded by a preferential offer to the Chatterji group of 10.23 lakh shares at Rs 73 each. The Chatterji group already holds a stake in Elbee Services.

Thus, while being cash neutral, the Chatterji group's stake in Elbee Services will go up by 13.2 per cent. The deal also involves buying of the promoter group's 12.08 per cent stake.

Apart from this, it will be issuing 16 per cent optionally fully convertible debentures to a Chatterji company entitling it to a maximum of 8.75 lakh shares of Elbee Services. Moreover, two Chatterji group companies have placed ICDs worth Rs 6.95 crore with Elbee Services and they have been given an option to convert these dues by allotting them a maximum of 30.55 lakh shares.