The Hindu Business Line : Gelli likely to take part in GTB rights issue

MR Ramesh Gelli, founder-promoter of Global Trust Bank (GTB), seems all set to partake of the proposed rights issue of the NPA-ridden bank. This is despite the SEBI's ban on his trading in the bank's scrip, which was recently extended to June 30.

The bank's top management is of the opinion that the ban will not have any impact on its proposed rights issue. "Even if we file the draft prospectus tomorrow it will take a minimum of 110-115 days before the issue closes. This would mean that the issue would be open till at least mid-July, giving Mr Gelli ample opportunity to participate in the issue," said senior officials at GTB.

According to Mr Gelli, "My only concern is that I should be able to participate in the upcoming rights issue. Even if the bank starts preparing the prospectus right away permissions will take time and it may open only by end-June. The issue will then be open to me since all rights issues have to be open for a period of one month."

By July 2004, Mr Gelli would be free from the SEBI ban unless the regulator decides to extend the period of the ban.

For a company to raise funds through a rights issue, it has to file a draft prospectus with SEBI for a minimum of 21 days. On getting approval, another 30 days are required to set the record date and the issue has to remain open for at least 30 days. At the moment there is no plan at the bank's side to immediately file for a rights issue. It is awaiting a foreign investor or two to pick up stake in the bank and perhaps re-work the capital structure before embarking on the exercise, said officials.

Meanwhile, there are rumours that the foreign investors, the US-based Newbridge Capital and Shinsei Bank of Japan, who were courting the bank, are no longer interested in it. With the due diligence done, the buzz is that the investors find the management's price too steep considering the bank's asset quality.

The bank needs Rs 500-600 crore to relieve itself from all the bad debt it has accumulated through its over-exposure to the stock markets and certain segments such as diamonds.

SEBI has found Mr Gelli and his associate entities guilty of creating artificial volumes and interest in the bank's scrip in collusion with Ketan Parekh entities. The bank has also been found lending funds worth Rs 200 crore to Ketan Parekh. Mr Gelli and his associates together hold close to 20 per cent in the bank as on December 2003.

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Gelli likely to take part in GTB rights issue