Is the Rs 670-crore simultaneous, but unlinked,
rights issue of Telco in trouble? Reports suggest that two key
financial institutions, LIC and GIC, which are Telco shareholders,
have declined to subscribe to their share of rights, putting the
prospects of Telco in jeopardy.
The issue, which opened for subscription on 29 September, is
offering 6,39,64,086 secured convertible debentures of Rs 65 each
in the ratio of 1:4, aggregating Rs 415.77 crore. It is
simultaneously offering 2,55,85,635 secured redeemable
non-convertible debentures of Rs 100 each in the ratio of 1:10,
aggregating Rs 255.86 crore.
LIC and GIC hold 9.32 per cent and 1.50 per cent stake
respectively in Telco. UTI and some banks, other major
institutional shareholders, hold 4.43 per cent and 5.89 per cent
stake respectively in Telco. The largest chunk of 30.25 per cent
is held by the public, followed by the Tata Group, which holds 26
per cent stake in Telco. Daimler Chrysler and NRIs/OCBs/FIIs hold
10 per cent and 10.61 per cent respectively and domestic mutual
funds about 2 per cent.
There are talks that UTI has also decided not to subscribe to
the issue. The reasons cited for this are:
- Telcos indifferent performance. The companys
bottomline has failed to improve. While the Indica segment
is showing promise of doing better, the commercial vehicle
division continues to fare poorly.
- The already-stressed financial conditions of the
- Financial institutions have become cautious about their
investments after various committees have found faults with
the investment decisions of UTI.
- Tight financial position of institutional investors. In
the past whenever such situations have cropped up, the
promoters have ended up subscribing to the issue instruments
to help the issue go through. In this case, it is not clear
whether the Tatas will indeed subscribe to the