Fame takeover hinges on FCCB conversion

There could be a twist in the Fame India acquisition script with the redemption of foreign currency convertible bonds holding the key to a keen tug-of-war.

Fame has two tranches of FCCBs with Rs 60.2 crore on its books. One can be converted into equity at Rs 90 per share and the rest at Rs 107 apiece. “If both are converted, Inox's holding will fall to 42.7 per cent,” said an analyst.

The Fame scrip hit the upper circuit on Wednesday to close at Rs 92. Around 6.16 lakh and 11.59 lakh shares were traded on the BSE and NSE respectively. While Inox was up 6.79 per cent to Rs 67.60, Reliance MediaWorks fell 1.26 per cent to Rs 227.90.

Industry sources say Inox would have to take the next call in terms of choosing to buy additional shares from the market (if the FCCB conversions actually happen) or just stay put.

“This would turn out to be an expensive acquisition for Inox but if RMW acquires these shares, it will end up having a large shareholding in Fame,” said an official.

“If these new shares are tendered to RMW, there is a possibility of the controlling stake slipping away from Inox,” added the analyst.

An Inox spokesperson declined comment on the company's plan to react to such a situation. Likewise, Mr Shravan Shroff, Fame's promoter remained silent on the issue.

According to investment bankers, RMW has acquired a 31.92 per cent stake in the multiplex operator through Reliance Capital in its open offer. As a result, its stake in Fame will go up to 44 per cent.

In a communiqué to the BSE on Tuesday, Fame said it had an early redemption for certain FCCBs equivalent to 5.01 lakh shares. As a result of the additional equity, the RMW offer size fell to 53.38 per cent from 62.08 per cent.