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Sensex zooms up to a new high

As Sensex soaring to the greater highs the promoters rejoice the rally as there is a handsome opportunity to promoters of the small companies which had issued warrants in the past 18 months and out of the 17 companies which had issued the warrants most of the companies are trading almost two times their warrant issue prices.Now this difference between the issue price initially and the present market prices may result in the promoters stake in their respective companies.

Some of the companies like Sequent Scientific , Arvind remedies , J.K.Tyres, Supreme infrastructure, Shakti pumps,, KEI industries, HCC to name a few whose present market prices are over 30% above their initial warrant issue price .

As a warrant permits the holder all the rights to purchase securities at the prices specified, SEBI clearly directs a warrant holder to pay 25% of the price at the time of the issue and the balance can be paid when the warrant is used as warrants can be exercised within 18 months anytime and if the promoters fail to do so within the stipulated date then they will not be eligible for any share or warrant purchases for the next 12 months .

However the investors are criticizing the warrant issues as it gives promoters to increase its share holdings at an attractive price in a bullish market and just avoid this abuse the regulation has come with the increase of upfront margin to 25% from the earlier 10% .But this warrant issue on the other hand is very good for those companies whose liquidity is very tight .Because when the investors are unwilling to infuse equity and debts are expensive the warrants issued thus benefits these companies and in the case of infrastructure companies this issue of warrants were too beneficial for them as it helped reducing some debt , It may however not be beneficial all the time for the shareholders , if the promoter is issued at the current market price or a little higher is fine but if the promoter is buying without any clue just upon sentiments that the prices will shoot up than it’s a bad practice .

However there are many more warrants issue in the horizon as the markets continue to be bullish overcast .