United Phos Promoters To Pick 9 Lakh Warrants Only

The promoters of United Phosphorus, who have the nod to subscribe to 36 lakh equity shares through 18 lakh warrants, are proposing to subscribe to only nine lakh warrants.

Warrantholders -- primarily promoters and their associates -- are now expressing their inability to pay the balance amount to the tune of Rs 21.60 crore due to financial crunch, and have requested the company to treat the application amount of Rs 7.20 crore as full money received towards lesser number of equity shares.

The warrantholders might have accepted the offer if the current market price had been around Rs 400 xb (the market price of United Phosphorus when the offer was made) instead of the current price of around Rs 110 per share.

Company sources, however, opine that the board has the power to allot nine lakh shares to the warrantholders as per their request.

Legal opinion on the issue is that as money received by the board is share application money and the partly paid-up shares were not issued earlier, the board can allot nine lakh fully paid up shares for the amount received.

Earlier, in a resolution passed on January 1994, the promoters and their associates were allowed to subscribed 36 lakh shares at a prices of Rs 80 per shares as against 18 lakh warrants.

The warrantholders were entitled to exercise their right to apply for shares between six months and three years from the date of allotment of the warrants.

The board of directors had fixed February 1, 1997 for the warrantholders to exercise their right and decided to collect Rs 40 per warrant by way of application money and the balance to be collected by making one or more calls at a future date.

After the regret note from the warrantholders, the board of directors called an extraordinary general meeting on March 16 to cut the size of equity shares from 36 lakh shares to 9 lakh shares.

The board proposed to pass a resolution to treat the share application money of Rs 40 received per warrant as full money received towards nine lakh equity shares.

It wants the balance amount of Rs 21.60 crore payable by the warrantholders for the remaining 27 lakh shares to be cancelled.

Market sources opine that the 18 lakh warrants were issued to the promoters and their associates when the market price of United Phosphorus was around Rs 400 xb.

As such the warrantholders would have taken full quota of their share had the current market price ruled around Rs 400.

Since the current market price has been around Rs 110 the promoters are wary of taking allotment.