-:Promoters take advantage of Rights Issues:-

Do you Remember what I said a couple of weeks back, in case of English Indian Clay Ltd; where there are strong Rumours that the promoters of the company could increase their stake.

English Indian Clay Ltd, is expected to come up with Rights Issue at Rs.1000 per share. The current market price of the scrip is only Rs.300.30!! The company had purchased the land for its upcoming Starch Project in Shimogha (Karnataka)--hence it can be said that the project is on stream......

KEC International Ltd, Reliance Industrial Infrastructure Ltd, Ennore Coke Ltd, ASM Technologies Ltd (mini-Infosys) and BGR Energy Ltd should be multi-baggers going forward--mark my words....

What to do with my recommended Suzlon Energy Ltd and VBC Ferro Alloys Ltd at the CMPs??!! Kohinoor Broadcasting Corporation Ltd could also be accumulated at the CMP of Rs.3.5. There is nothing to lose from here.........

In the Power Sector those who have invested in my strongly recommended Indo-Tech Transformers Ltd (BSE Code-->532717) at around Rs.173, should now keep a SL of Rs.187.4 and Rs.169.8 (exit stop loss) and keep holding the rest.

The problem with the investors world wide is that, they buy shares when the market rises up and sell when the market goes down....which is not the correct strategy all the time.

The discount scheme to the Paid Packages (Premium Services, Quickie Service and Portfolio Management Service) expires on 25th November, 2008.

Chennai: Investors have accorded a lukewarm response to rights offers from companies seeking to fund their expansion plans. But promoters appear to hold a more optimistic view.

They have used the rights route to hike their stake in companies at the current rock-bottom valuations.

The high borrowing cost of debt and shortage of funds have prompted many a company to resort to rights offers in recent months. The market, clearly, did not take to this kindly as concerns about equity dilution led to the stocks being beaten down to levels that made the rights offer price quite unattractive.

Shares of companies ranging from Tata Motors and Hindalco to Dish TV and Suzlon Energy were beaten to new lows, after rights announcements. While investors have shied away from their rights entitlements, promoters have stepped in to take up the unsubscribed portions.

Take the case of Hindalco — the promoter and promoter group companies along with other underwriters have fully subscribed to the offer after it received only about 43 per cent subscription from non-promoter shareholders. As a result, the promoter group’s stake in the company has risen from 31.9 per cent to 35.1 per cent post offer. The rights issue of Tata Motors also remained undersubscribed, providing an opportunity for the promoters to take up the rights portion. Their stake stood at 42 per cent post-offer from 33 per cent before it, bringing in a little over Rs 3,000 crore.

More lined up: Despite these offers struggling for subscription, more companies such as Jaiprakash Associates and Religare Enterprise have recently announced rights issues. The former plans to raise about Rs 1,800 crore to fund its capex plans. Interestingly, the company’s announcement to the exchange states that it plans to raise funds through the rights issue “instead of issuing further warrants to promoters on preferential basis”. The promoters have also given a firm commitment to subscribe to the unsubscribed portion, if any.

Religare Enterprises plans a rights issue priced at Rs 355, a premium over the current market price of Rs 330. Earlier, Religare said that it planned a 2:3 (Two:Three) Rights Issue where the Promoters would pick up unsubscribed portion----GREAT NEWS. Religare Enterprise Ltd will use the proceeds from the rights issue to “propel its future growth plans both international and domestic,” said a company official.

The broking firm, which got listed in last November, said it will file the draft letter of offer with SEBI in the first week of December 2008. The net worth of the company is expected to go up to Rs 2,400 crore after the Rights Issue.

The company recently acquired Hichens, Harrison and company, the oldest broking and investment firm in London.

The promoter’s stake as of September 2008 stood at 54 per cent. Promoters typically raise their stake in a company, through preferential allotments or creeping acquisitions of shares, both of which are subject to Securities and Exchange Board of India regulations. Picking up the unsubscribed portion of a rights issue may well be a relatively hassle-free route to increase stake.

Incidentally, recent weeks have also seen promoters and top management in some companies such as L&T, IVRCL, Edelweiss Capital etc take advantage of the current market conditions to pick up shares.

This proves the fact that even the Seasoned Promoters of Companies believe that the world is not coming to an end; which a section of the Media is trying to make us believe....