In a bid to reorganise operations and improve performance, Piramal Glass has announced its plans to delist. Managing Director Vijay Shah told CNBC-TV18 in an interview that the delisting offer by the promoter is at an indicative price of Rs 100/share.
Promoters hold 74 percent stake in the company and are confident about the company's business, he said.
Further, he said that the delisting price of Rs 100 is a fair value for providing exit route to shareholders and 2/3rd of minority shareholders are in the favor of delisting.
The company's debt equity ratio currently stands at 3:2.
Piramal Glass, a part of the Piramal Group, manufacturers of glass packaging solutions for the pharmaceuticals, foods and beverages and cosmetics and perfumery industries.
Also Read: Piramal Ent buys 20% in Shriram Capital for Rs 2,014 cr
Below is the edited transcript of Vijay Shah's interview, MD of Piramal Glass with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Latha: What is the purpose of the delisting and will you be willing to up the price, will you delist at even higher price if called for?
A: The delisting offer is made by the promoter, so I have no say in that and the promoter has indicated a price of Rs 100/share in the offer. Glass industry is very capital intensive and with the recent expansion, our capital gearing has become very high. Debt equity is almost 3:1 and the business environment is not very positive. The performance that we were expecting in the last two years has not come through mainly because of the business environment.
We found that the capital structure is pretty lopsided and anything we do to correct it will not be possible because the promoters already hold 75 percent equity in the share in the shareholding. If you were to do capital restructuring like rights issue or anything like that, the promoter holding will go up and that will not be allowed by Securities Exchange Board of India (SEBI). We had no option but to opt for this path.
Latha: A rights issue which is well bid by the minority shareholders may still keep it at 75, isn't it?
A: Two-three years back we did a rights issue. We had to pay some capital and at that time, the promoter shares went up because a lot of minority shareholders did not pick up the rights then we have to correct in a year's time. Now in a situation and a market like this, if it goes up substantially, the whole issue will fail. Also, if one notices the share price was falling in the recent past, so the market did not have much confidence in the future of the company as much as the promoter has.
We know that this business is cyclical, it goes through ups and down. There are long spells of downward trend and then it recovers sharply. We felt that it is a right time to give lot of shareholders who do not have confidence, a reasonable exit. When the delisting was announced, the share price was also around Rs 70 and the promoters indicated that they are willing to buy it back at Rs 100. It is a very fair return to the shareholders.
Sonia: The delisting document that the promoter wants to pump in more money for capex and it is only this holding of 75 percent that is limiting it, so what could be the exact quantum of money that promoters are willing to pump in?
A: The debt-equity is 3:1 and that is not very healthy. Even if you were to correct it to 2:1, we will have to pump in around Rs 400-500 crore. The promoter is willing to pump in whatever is needed for the company for a healthy capital structuring position. We have not determined the exact amount, but that will be done later.
Sonia: What is the game plan if the company fails to garner enough shares to delist?
A: Before we came to this step, we have already taken the permission of the shareholders. and most of the shareholders have sanctioned delisting.
Latha: You mean you took the majority of the minority shareholders?
A: Yes. Two-thirds were in favour and one-third were against it.
Sonia: Although you have indicated to us that the delisting offer is made by the promoters, so you may not be able to share too much as far as the price etc is concerned but do you have any idea on why there is no premium to the current market price given to minority shareholders?
A: The current market price has corrected after the delisting was announced and the indicated price has given. If one goes to see the price when the delisting was announced was around Rs 70. It is a very fair premium to the then current market price.
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