With their stocks struggling, the country's top sugar barons are ramping up their shareholding in their companies. Companies such as Balrampur Chini, Dhampur Sugars, Simbhaoli Sugars and Dwarikesh Sugar are all issuing warrants to their promoters which, on conversion, will give them a higher stake.
DCM Shriram Industries , too, is issuing 700,000 warrants to its promoters, Tilak Dhar and his brothers, which will raise their shareholding from 32.54 per cent to 42 per cent, though this has been challenged in the courts by shareholder Harish Bhasin, who has mounted a takeover bid on the company.
Though share prices of sugar companies have started rising in the last month or so, these had crashed almost 50 per cent in the previous 12 months thanks to the fall in sugar prices resulting from record sugar production.
However, the sugar cycle is projected to improve later this year as the next sugarcane crop will be smaller and the shares have started rising in anticipation.
According to experts, as the conversion price of warrants is a mark up on existing prices, this is good time for businessmen to ramp up
their shareholding.
Dhampur Sugars is issuing four million warrants to its promoters, the Goel family, for Rs 25 crore (Rs 250 million). "We are issuing warrants to raise long-term working capital as advised by our bankers. The company had incurred losses last year and it was necessary to pump in money. As a result, we will also raise our stake,"said Gaurav Goel, the company's managing director.
Balrampur Chini is issuing 10 million warrants and 7.3 million shares to its promoters, the Saraogis, for Rs 160 crore (Rs 1.6 billion). The allotment of shares has been completed, while the warrants will be converted over an 18-month period.
Simbhaoli Sugars is issuing 3.1 million warrants to its promoters for Rs 13.19 crore (Rs 131.9 million). Dwarikesh Sugar is also issuing 1.5 million warrants to raise Rs 10 crore (Rs 100 million). "The liquidity crunch is seen as the main reason behind the issue of warrants and, as a byproduct, the promoters will also raise their stake," said Vikram Suryavanshi of Karvy Stockbroking, adding: "The liquidity from these warrants will help them in running operations."