Stocks

SEBI extends warrant conversion deadline for Deepak Fertilizers

PALAK SHAH Mumbai | Updated on April 16, 2020 Published on April 16, 2020

But experts see no correlation to Covid-19 lockdown

SEBI has granted an extension of deadline to the promoters of Deepak Fertilizers and Petrochemicals Corporation (DFPC) with regard to conversion of their warrants into equity. The company said the extension was granted until May 15 due to ‘present uncertain times’. However, legal experts said that it is rare for SEBI to grant an extension of warrant conversion deadline without issuing a ‘written public order’. Also, conversion of warrants had 18-month time period and one month Covid-19 related lockdown could have no correlation to it.

A warrant is a derivative instrument which the buyer promises to buy at a later date at an agreed price or the initial payment gets forfeited. As per SEBI guidelines on preferential issues, convertible warrants have a deadline of 18 months from the issue date.

On April 15, DFPC said that its promoter Robust Marketing Services (RMS) had approached the company to make request SEBI for an extension. DFPC had issued convertible warrants to RSM for ₹200 crore in October 2018. Then, Deepak Fert shares were trading around ₹200.

On Thursday, the shares closed at ₹92. At the time of warrant purchase, only a part payment has to be made. The remaining amount has to be given on conversion at a price agreed at time of the issue for exercising the warrants. The share price of Deepak Fertilizers is currently trading at a substantial discount to the warrant conversion price. If the promoters don’t pay then the warrant subscription money has to be forfeited.

According to the public notice by DFPC the promoters had paid ₹50 crore at the time of issue of warrants, which was 25 per cent of the issue size. Later, in October 2019, the RMS paid another ₹25 crore out of the aforesaid ₹200 crore. It means the promoters were required to pay ₹125 crore additional sum to the company as per the warrant exercise norms by April 2020. But SEBI has now extended this deadline.

“In the recent past SEBI has disallowed any such request from promoter of even a large media and entertainment company. Also, the regulator issues a written public orders with regard to the companies it makes an exception. From the public disclosure of Deepak Fertilizers it is not clear as to when the company approached the regulator and exact date of SEBI granting it an extension,” said a legal expert.

SEBI did not comment on queries regarding why there was no ‘written public order’ and if 18 months deadline for conversion of warrants that were issued in 2018 had anything to do with Covid-19 related lock-down in March 2020.

Published on April 16, 2020

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Sincerely,

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.