Nirmal Kotecha, one of the co-promoters of Chennai-based entertainment firm Pyramid Saimira Theatre, has sold 9.4% stake in the company through a mix of inter-se transfer to co-promoter PS Saminathan and market sales. As of January 2, Kotecha held 15.48% in the public listed company down from 24.89% on September 30.
The deal follows an agreement between the three co-promoters Saminathan, Kotecha and NC Ravichandran wherein Saminathan was to acquire almost the entire holding of the other two. In October, the cinema chain operator had disclosed that Saminathan plans to buy around 7 million shares, or 24.9% of the company, from co-founders at Rs 200 each, raising Saminathan’s holding in the company to 46.9%.
Subsequently in late November the agreement was modified where the transaction was to be struck at the market price of the stock or Rs 200 whichever was less. Since the market price has been hovering much lower around Rs 40-60, the selloff by Kotecha would have happened at the market price.
While Kotecha has sold close to half his holding, Saminathan, has bought a part of it and as of December 5th, his stake stood at 24.45% as against 21.9% as of end September. His exact current holding has not been disclosed yet but it is apparent that it would have gone up further over the last one month as Kotecha cashed out.
The firm had been in the news recently where it was the target of a serious fraud wherein the company was sent a forged letter of SEBI asking it to make an open offer to minority shareholders as one of the co-promoters PS Saminathan had violated the creeping acquisition norms by purchasing more than 5% stake from the open market in a year.
Pyramid Saimira announced that SEBI had indeed sent an advisory to Saminathan to file prospectus for public announcement for the open offer to acquire 20% of shareholding within 14 days at a price of Rs 250/share. Thereafter SEBI denied having sent any such advisory and Pyramid Saimira then said it had received a forged letter and called for investigation by the concerned investigative agencies including CBI. The matter is still under investigation.
Pyramid Saimira had consolidated net sales of Rs 1,030 crore with net profit of Rs 117.92 for the year ending March 08. For the first half ending September 30, the firm had standalone net sales of Rs 502 crore with net profit of Rs 22.2 crore. This represented almost 100% jump in revenues on a non consolidated basis for the first half even as profits dropped 25%.
WAS KOTECHA IN DIRE NEED OF MONEY?
The transaction raises another question about the mode of sale. Kotecha decided to sell shares both in the open market and through inter-se transfer. Though the multi-tiered transaction’s per share price is not known, it is unlikely to have been struck at a high premium to the market price.
This means Kotecha actually sold shares close to market price which is trading at levels of 25-40% of the original deal value of Rs 200/share as recently as two months back. Promoters ‘usually’ do not revise their expected price within one month of a stock market slide. Typically, such transactions gets revised marginally or promoters wait to see scrip climb back.
But in this case Kotecha has liquidated a large chunk of his stake at the rock bottom price. At the original price, Kotecha would have pocketed around Rs 50-55 crore for selling 9.4%. But given the estimated average selloff price of around Rs 50-60/share he would have encashed just about Rs 15-20 crore. The question is why was he in a hurry? Has he also stretched himself in the overall leveraged market where people had in the past borrowed to invest in shares…..