Wednesday, 18 September 2013 00:34
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Amidst debate over the mega Rs. 40 billion rights cum warrants issue of JKH, some analysts are of the view that the offering is attractive overall.
Last month JKH announced a Rights Issue of two shares for every 13 held at Rs. 175 each with two warrants attached.
First warrant will be on the basis of one for three subscribed rights at Rs. 185 each exercisable 24 months and warrant 2 at Rs. 195 each exercisable 36 months.
Since the announcement, JKH share price dipped to a low of Rs. 204 but had recovered of late thanks to foreign demand. Yesterday it closed 90 cents up to Rs. 211.80.
The dip was owing to some believing rights wasn’t priced right whilst others expected it to be slightly higher.
However, some opined that those who downgraded JKH hadn’t factored in the true value of the warrants.
They said the valuation of the warrants is high. One broker valued warrants (which a Rights subscriber will get it free) at Rs. 66 and 76 respectively. “Essentially an investor is paying less for the rights if one factor in the value of the warrants,” they added.
On this basis, the combined value of the 2015 and 2016 warrants are Rs. 142 and the value of both per rights share is Rs. 47. Therefore the effective price of the Rights is Rs. 128 whereas JKH’s yesterday’s peak was Rs. 212.
