Over 100 small- and medium-cap companies have in the past two months informed the stock exchanges of their plans to offer preferential share issues to their promoters, foreign institutional investors and others.
The preferential offers have taken the form of equity shares, cumulative convertible preference shares, optionally convertible preference shares and warrants, with equity share options.
These companies plan to mobilise Rs 1,500 crore (Rs 15 billion) through the issue of 245 million equity shares or convertible preference shares and warrants, to be converted into equity at a future date.
Interestingly, 19 other companies have informed the exchanges that they have already raised Rs 854 crore (Rs 8.54 billion) by allotting 75 million shares to financial institutions, FIIs, investors and promoters.
So, in the first two months of the current year, small- and mid-cap companies have mobilised or have proposed to raise Rs 2,354 crore (Rs 23.54 billion) by issuing 320 million shares. Most of these preferential offers have been made by textiles, construction, hotels, software, auto ancillary and pharmaceutical companies.'
FIIs have been the major buyers -- they bought over 50 per cent of the total shares. Indeed, 27 companies offered 120 million shares to FIIs valued at Rs 1,215 crore (Rs 12.15 billion). The promoters of 36 companies also allotted to themselves 102 million shares valued at Rs 560 crore (Rs 5.6 billion).
The remaining shares were proposed to be offered to the financial institutional on conversion of loans and to strategic investors on a private placement basis.'
In the pipeline are preferential offers from companies such as Balarampur Chini, HCC, Welspun India, PSL Holdings, Thiru Arooran Sugar, SRF, Kopran, Steel Strips and Wheels and KPIT Cummins.
However, Hotel Leela Ventures, Kotak Mahindra Bank, Pantaloon Retail, Max India and Mysore Cement have already issued equity shares through preferential offers. Some of these preferential equity offers, however, it is believed have been made to cash in on the mad-cap stock boom.
However, most companies that made preferential offers are mobilising money for their working capital requirements, for the expansion of their capacities and for setting up new businesses.
