The Company Law Board (CLB) declined to accept Electrosteel Steels’ proposal for preferential issue of shares to promoters at a discounted price. The company, promoted by Electrosteel Castings, will have to issue the shares to promoters at the face value of ₹10 instead of the proposed ₹5 a share. Electrosteel Steel is issuing the shares in relation to a corporate debt restructuring agreement with its lenders. The agreement called the promoters to bring in ₹222.50 crore to the fund-starved company. Following the CLB order turning down Electrosteel Steels’ petition, the company’s board decided on Tuesday to issue the shares at ₹10. This move would comply with SEBI’s ICDR Regulation.

Shareholders’ nod

The Companies Act, 2013, which is yet to take effect fully, prohibits issuance of shares at a discount. In a postal ballot earlier, the shareholders, however, had passed the board’s proposal for a discounted issue.

Since the quantum of equity capital will remain unchanged at ₹222.50 crore, the number of share would be half of what was estimated earlier.

According to company estimates, in the earlier price plan, Electrosteel Steels would have issued 44.50 crore shares. Now it would issue only 22.25 crore shares. Post-issue, the promoter holding would go up to around 45 per cent from the pre-issue holding of 40 per cent.

The CDR was triggered by the delay in payment of interest and instalments to lenders, led by SBI. The stock of Electrosteel Steels on Tuesday closed flat at ₹7.18 on the BSE. The total traded quantity on the exchange was 25.2 lakh shares, five times the past fortnight’s average.

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