The Hindu Business Line : Morepen offers scheme to convert FDs to equity

IN an attempt to provide some respite to fixed deposit holders, the board of directors of Morepen Laboratories Ltd (MLL) on Tuesday decided to give them the option of converting fixed deposits into equity.

According to a company statement, "This would give the option to FD holders to convert their deposit amount into fully convertible debentures and also provide reward by way of possible equity upside."

This scheme has been approved after seeking views from the FD brokers, financial institutions and banks. It would now have to receive a nod from the shareholders at the forthcoming annual general meeting.

The same scheme is likely to be offered to the unsecured creditors of the company as well. MLL has about 80,000 deposit holders with outstanding amount totalling Rs 162 crore.

Company officials maintained that the new scheme is being announced so that deposit holders could exit early and would not have to wait for four years as per the order issued by the Company Law Board (CLB).

The CLB cleared scheme entailed that depositors up to Rs 5,000 be paid fully within one year from the date of maturity of the FD, while the entire principal amount of the depositors above Rs 5,000 would be paid in four years in varying percentages every year from the date of maturity.

"FD holders were concerned about waiting for four years and, therefore, the new scheme has been formulated," said the company spokesperson.

However, the conversion of FDs into equity would involve infusion of fresh equity. The amount of fresh equity would depend on the conversion rate, said the company official.

The conversion would be in accordance with the Securities and Exchange Board of India determined formula at the value price that would include the outstanding amount plus the overdue interest.

MLL said that the proposal would help as this would ease out the current pressure on the operations due to regular outflow of funds on account of FD repayments and also help increase the shareholders' value.

MLL recorded a net loss of Rs 13.13 crore for the third quarter ended December 31, 2003 as against a net profit of Rs 14.33 crore during the corresponding period last year. The total income of the company also dipped to Rs 22.58 crore (Rs 152.35 crore).

The company on its part claimed that it is poised to make progress in terms of sales and profits in the fourth quarter. "The sales in the December quarter represent a trend of consolidation given that this is the second consecutive quarter in which downfall of sales of the previous three quarters has been arrested," said the company. The company's share today hovered around Rs 9.90.

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