Approval of Issue of up to 15070000 equity shares of Rs. 1/- each upon conversion of unsecured loan at a price of Rs.14.60 per equity share.
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The board of India Homes Ltd has approved the issue of up to 15,070,000 equity shares of Rs. 1 each to be issued upon conversion of an unsecured loan. The conversion price has been fixed at Rs. 14.60 per equity share, which implies a premium of Rs. 13.60 over the face value. At this price, the total equity value of the conversion works out to roughly Rs. 22 crore. This is essentially a debt-to-equity swap where the existing unsecured lender will receive shares in lieu of repayment of the loan amount.
This is a dilutive event for existing shareholders as the share count will increase, but it also reduces the company's debt burden and removes any future interest obligation on this loan. Short-term share price may come under pressure due to dilution, while the balance sheet becomes slightly stronger with lower liabilities.