The Telegraph
Since 1st March, 1999
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Stock rally may come in handy for CESC

Calcutta, Oct. 16: Whatever may have fuelled the rally in CESC’s share price — be it fascinating speculations or fundamental strengths of the company — it has done the promoters a world of good.

The price of the stock having moved up sharply, the Goenkas — the promoters of the power utility — may now get CESC’s debts restructured without having to pledge their entire holding with the company’s lenders.

The lenders have agreed to CESC’s proposal to recast its debts, but insisted on the promoters pledging their entire stake in the company in return. The Goenkas, however, have offered to pledge up to 40 per cent of their holding in CESC — or 16-20 per cent of the company’s shares. Though the promoters’ acknowledged holding is around 40 per cent, their actual control is believed to be close to 50 per cent.

“The recent rally in the price of CESC’s shares reinforces the promoters’ offer to pledge 40 per cent of their stake,” said Sumantra Banerjee, the company’s managing director.

Though the lenders have not agreed to the Goenkas’ offer as yet, Victoria House is hopeful that the financial institutions are now going to climb down on their demand for full control of the promoters’ holding in the company.

CESC’s share price has gone up 87 per cent over the last couple of weeks. From a close of Rs 46.60 on September 30, it has gone up to Rs 86.60 — the price at which it was last traded on the Bombay Stock Exchange today.

Banerjee said, “We are hopeful that the debt restructuring deal with the lenders will be completed by the end of November. Previously we thought we could finish it by October.”

The lenders had also asked the promoters to infuse funds into the company. CESC is issuing 33 lakh shares to the promoters at Rs 49.70 apiece, which will result in an infusion of Rs 16.40 crore. The funds are going to be used to pay down CESC’s debts. The lenders had insisted on the promoters infusing Rs 50 crore.

Meanwhile, at the company’s recently-held annual general meeting, vice-chairman Sanjiv Goenka said CESC was looking to set up a 250-megawatt power plant in Bengal at a cost of Rs 1,000 crore. He has also indicated plans of roping in a strategic investor from abroad.

The company is planning a voluntary retirement scheme for its employees at the Cossipore and Mulajore units, the financial implications of which are being examined at present.

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