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Pentafour has a blueprint to go debt-free

Madras based Pentafour Software and Exports Limited has convened an extraordinary general meeting on February 1.

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The meeting would seek shareholders' approval for making preferential allotment to foreign institutional investors, non-resident Indians and overseas corporate bodies. Also on the agenda would be the issue of raising the limit for foreign institutional holdings.

The company's board that met recently decided to seek the shareholders' approval for increasing the stake of FIIs from the present 24 per cent to 30 per cent and allot an additional limit of 10 per cent for OCBs and NRIs.

The funds generated from the offering would be used primarily to pre-pay the entire borrowings to make the company debt-free and to invest in animation and special effects software projects for the films and broadcasting segment.

The company also proposes to make preferential allotment of equity shares of up to a maximum of 2.93 million shares. These would be given to the likes of FIIs, FIs, NRIs, pension funds, private equity funds, mutual funds and corporations. The sale would be made in either Indian or foreign currencies at a price based on guidelines issued by the government and the Securities and Exchange Board of India.

It is also proposed to seek the approval of shareholders at the EGM for investing in wholly owned subsidiaries, joint ventures and acquisitions in India or abroad.

A company statement said that the auditors, Price Waterhouse, would interact with the relevant agencies in obtaining the approvals and co-ordinating and monitoring the deployment of the funds in pre-paying the borrowings.

V Chandrasekaran, chairman and managing director of the company, has been quoted as saying that "Our intention is to raise between Rs 1.5 billion and Rs 1.8 billion, depending on the price we get for the new shares. Our main objective is that being a 100 per cent venture, the company should have more operational freedom and should be free from debt and interest cost.''

He said that the company's total borrowings comes to Rs 1.5 billion, of which 60 per cent is in the form of foreign currency loan raised at Rs 35 per dollar. Since then, the rupee has been depreciating against the dollar while the loan portion remains the same.

If the entire debt is cleared, the company will be able to save nearly Rs 300 million a year on the interest outgo, he pointed out.

The high debt is having its impact on the interest outgo that increased to Rs 249.2 million in 1997-98 from Rs 148.2 million in the previous year. In the first half of this year, it again jumped to Rs 167.3 million from Rs 94.2 million. Despite this it made a record profit after tax of Rs 683.6 million last year to Rs 469.4 million.

- Compiled from the Indian media

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