Analysts warned that the resolution plans suggested by companies vying to buy Sintex’s assets proposed to write off the existing equity fully. That will mean, the stock price will also plunge to zero.
“If you own Sintex (Industries), kindly note: the share is likely to go to zero. Both resolution plans say they will write down equity to zero. Be warned,” said Deepak Shenoy, Founder of Capitalmind on Twitter.
The phenomenon is not new and has most recently happened in the case of Lakshmi Vilas Bank and Dewan Housing Finance Corporation (DHFL), he added.
Reliance Industries-ACRE and Welspun Group unit Easygo Textile Pvt Ltd are the two highest bidders among the four firm offers that lenders have received for the textile-cum-yarn making company, ET reported. GHCL Ltd and Himatsingka Ventures Pvt Ltd are the other two bidders,
The RIL offer includes payment of 2,280 crore to financial creditors, equity infusion of 500 crore for working capital requirements and a 83 crore payment to employees and trade creditors. The existing equity will be fully written off. RIL will hold 79 per cent, ACRE will hold 11 per cent and 10 per cent will go to lenders after the acquisition. Details of the Welspun offer aren’t available, ET said.
The company did not confirm or deny the development.
“We have disclosed that pursuant to Invitation for Expression of Interest for Resolution Plans, the Interim Resolution Professional had received Four Resolution Plans and the same are under evaluation by the Interim Resolution Professional and then shall be placed before the Committee of Creditors, for its further consideration” the company said, adding it is not in a position to comment further.
Sintex Industries was demerged into two entities. It held textile and yarn business. Its plastics, custom moulding, prefab and infra business was housed under Sintex Plastics Technology. One its subsidiary Sintex-BAPL is also under insolvency process.
Shenoy said investors should also get out of Sintex Plastics Technologies. “I would get out of Plastics also, as I think that also will go to zero. But Plastics news isn’t confirmed yet; Sintex industries is more or less sure now,” he added.
Sintex Industries and Sintex Plastics Technologies both plunged down 5 per cent on Thursday.