Seshasayee Paper Promoters To Hike Stake To 51 Per Cent

The promoters of Seshasayee Paper and Boards Ltd, a member of the Chennai-based Esvin group, are raising their stake to 51 per cent from the present level of 31 per cent by making a private placement of 12.50 lakh convertible warrants of Rs 90 each aggregating Rs 11.25 crore to themselves.

Proceeds of the issue will be used to part-finance the company's Rs 222.05 crore expansion-cum-modernisation project which includes enhancing production capacity from the existing 60,000 tonne per annum to 1,15,000 tonne per annum. As per its earlier plan approved by the lead financial institution, Industrial Development Bank of India, the company had decided to contribute Rs 46.05 crore out of internal accruals. According to the company's notice to its shareholders, the internal funds generation is expected to fall short of the requirement due to the long spell of recession. To meet the shortfall in internal accruals and ensure timely completion of the project, the promoters have decided to infuse additional funds through convertible warrants, states the notice.

 

The company proposes to seek shareholders' approval to offer and allot 12,50,000 convertible warrants of Rs 90 each amounting to Rs 11.25 crore to the promoter group on a private placement basis at the annual general meeting scheduled for August 22. It will allot warrants only after receiving 10 per cent of the face value of the warrants. The balance amount is payable in one or more instalments as determined by the board. The warrants will be compulsorily converted into equity shares of Rs 10 each at a price of Rs 24 per share including a premium of Rs 14. They will be converted at a time determined by the board but not later than 18 months from the date of allotment of warrants or such extended time as may be permissible under the Securities & Exchange Board of India (Sebi) guidelines.

However, the warrants are not transferable except within and among the promoter group, and the equity shares allotted on conversion of these warrants will not be transferable for a period of three years from the date of their allotment except within and among the promoter group. Following the private placement of convertible warrants to the promoters, the shareholding pattern of the company is set to change with the promoters holding increasing to 50.70 per cent. The holding of financial institutions and banks, however, would reduce to 27.46 per cent while the stakes of foreign institutional investors and mutual funds will come down to about 1.97 per cent as against their previous holding of 38.90 per cent and 2.79 per cent respectively.

The public will hold about 19.87 per cent against their current holding of 28.15 per cent.

Meanwhile, Seshasayee Paper and Boards Ltd will also seek shareholders' approval to subscribe to the preference share to be issued by group company, Ponni Sugars and Chemicals Ltd, for an amount not exceeding Rs 5 crore. The preference shares of Ponni Sugar, which suffered a net loss of Rs 7.04 crore in the quarter ended June 30, 1998, will carry a coupon of 14 per cent and the redemption period will not exceed 10 years.