The Hindu Business Line : Core promoter subscribes to Leyland's bond issue

ASHOK Leyland's principal shareholder, LRLIH Ltd of UK, has invested $50.93 million (about Rs 230 crore) into the company, by subscribing to Ashok Leyland's $100 m bond issue.

The Hindujas have a majority stake in LRLIH Ltd. The bond - an instrument called foreign currency convertible bond - carries a coupon rate of 0.5 per cent. In January, Ashok Leyland's senior officials said that they expected to raise FCCBs at 1 per cent; therefore, the issue has been priced more attractively than the company had originally expected.

These bonds can be converted into equity shares either at the wish of the bondholder or of Ashok Leyland. A bondholder can ask for the conversion after 40 days from today. Ashok Leyland can exercise its call option (or, force a conversion) after two years.

But whenever the conversion happens, it will be at a price of Rs 335 per share, or at a 21.6 per cent more than Rs 275.50, the price at which the Ashok Leyland share closed the day before the issue — April 22. , 2004. However, for Ashok Leyland to use its call option two conditions need to be satisfied. One, the share price should have reached a level of 120 per cent of the issue price, which works out to Rs 402. Second, it should have remained at that level for at least 30 days.

Ashok Leyland officials said that LRLIH subscribed to the issue in order to maintain its stake (at 50.93 per cent), which otherwise would have got reduced, if non-promoters bought most of the bonds.

The money raised through the bond issue will be used for expanding capacity.

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