Ram Kaashyap Investment Ltd, a Chennai-based small cap firm with diversified business interests, is acquiring 100 per cent stake in Gemmia Worldwide S.A., an oil sludge treatment and recycling firm based in Tortola (British Virgin Islands), for $150 million (Rs 670 crore).
The deal is to be financed through a mix of overseas bond and share sale.
Calls made by VCCircle to reach out to the management of the firm to find out the strategy behind a small firm making an overseas acquisition over 15 times its own market cap did not receive any response.
The company’s board has authorised and approved the issue/placement of global depository receipt (GDRs) for $75 million and foreign currency convertible bonds (FCCBs) of $75 million. The GDR issue will open on August 16, 2011, according to a company filing to the Bombay Stock Exchange. Ram Kaashyap is also changing its name to Gemmia Oiltech Services Ltd, in line with the proposed new business activity.
On the BSE, shares of Ram Kaashyap Investment hit the upper circuit for the day to close at Rs 10.72 per scrip, up 2 per cent from the previous close. At this price, the Indian firm has a market cap of just Rs 47 crore or $10.5 million. This means, the overseas bonds and depository receipt issue may lead to significant equity dilution.
Gemmia Worldwide S.A. is engaged in oil sludge treatment, oil reservoir cleaning services & technologies, and miscellaneous clean technology development, with assets and activities across Russia, the USA, India, China and South-East Asia. The total potential size of its business is estimated to be $40 billion globally and about 30 per cent of its market is outside the USA and Western Europe.
Ram Kaashyap Investment is involved in investment and securities trading, along with trading in overseas rights of south Indian films, operating Tamil Box Office (TBO, a 24×7 Tamil movie channel), Web streaming of south Indian movies and other content, as well as animation and gaming. The two-decade-old firm is promoted by A Venkatramani and Jude Jeyaparakash.