Shares of Welspun Corp have surged around 6 percent in a sluggish market today after the Securities and Exchange Board of India dropped charges against 30 of the 69 entities alleged to have been involved in the price rigging of Welspun group firms - Welspun Corp, Murli Industries, Hubtown (formerly Ackruti City), Brushman India, and RPG Transmission in 2010. These entities were banned from accessing the capital market since December 2010.
The market regulator's order will now enable Welspun to to pay its foreign currency convertible bond (FCCB) holders. In November 2009, the company had raised $150 million through an FCCB issue, which will be maturing in 2014.
Reacting to the order, Welspun Group CMD BK Goenka said, "This is the landmark judgment which has exonerated Welspun Group promoters, reaffirming highest standard of corporate governance and ethical practices within Welspun Group.
In February HSBC hads downgraded Welspun Corp to neutral from overweight and cut target price to Rs165 from Rs 265. "The company reported lower-than-expected sales volume and we believe it is likely to miss its full-year guidance on sales volume as well," HSBC said in a note, which had further impacted the company's stock price.
In its December 2010 order, Sebi had charged all the 69 entities of being party to ramping up the stock prices of Welspun group firms ahead of share placements. Welspun's share price surged from Rs 50 in March 2009 to Rs 275 by the first week of October when the company finalized its foreign currency convertible bonds, or FCCB, offering. In December, the company even tried to buyback the bonds from investors at a discount to the issue price, but the bondholder refused, as they found the discount too steep.
Akhil Jindal, director of Welspun Group denied the ban to raise money from the capital market. The net debt is currently at Rs 2,500 crore against their networth of Rs 5,000 crore, he said in an interview with CNBC-TV18.'
The company is planning to bring it below Rs 1,000 crore in three years which is at 0.23 of debt equity levels. They intend to wait for the right time to buy back some of the FCCB bonds.
As per him the Rajiv Gandhi equity scheme is structurally a very good move and can bring in close to Rs 150,000 crore annually into the market.