Century Enka To Offer Ncds Against Equity

In an unprecedented move Century Enka, a company jointly managed by the Dutch giant Akzo Nobel and the B K Birla group, plans to offer secured redeemable cumulative non-convertible debentures to its shareholders against their equity holdings.

The proposed debentures are priced at Rs 71, with every debenture carrying 12 per cent interest, to be redeemed at the end of three years from the appointed date. The company has proposed the appointment of a trustee to the debentures registered with the Securities and Exchange Board of India.

The proposed offer, which has been outlined by the solicitor firm Khaitan & Co, has already evinced interest among shareholders simply because of its face value of Rs 71 against the ruling market price of Rs 55 per share.

 

The offer has been placed before the Calcutta High Court and will be put up for shareholders' approval at a general meeting on August 2.

Century Enka will also offer buy back facility of debentures at par (i.e., principal amount and accumulated interest thereon till the date of payment) to original debenture holders immediately after issue and allotment of the proposed debentures.

The offer proposes to automatically convert equities of the shareholders having less than 10 ordinary shares in physical form into debentures unless a written intimation from the shareholder to continue holding in the small lot reaches the management. Shareholders having more than 10 equities will also opt for the offer.

Sources in the Birla Buildings', headquarters of the B K Birla group, said the scheme was aimed at reduction of costs involved in servicing huge number of shareholders. "The offer will also help increase the authorised borrowing limit of the company," they added.

The said the conversion of equities into debentures would not affect the company's debt-equity ratio which was at 0.31:1 on March 31, 2001, against 0.57:1 on March 31, 2000. Net interest outflow stood at Rs 2.93 crore on March 31, 2001.

The Rs 957-crore company is planning to upgrade and modernise its production facilities at Pune, Mahad and Bharucha by replacing outdated machinery.