Current Syntax shareholders stare at market zero

A day after Reliance Industries’ acquisition of debt-ridden Syntex Industries, current Syntex shareholders discover themselves at a loss, with the inventory value now zero.

Within the early hours of yesterday, traders had been nonetheless shopping for Syntex Industries shares as quickly because the information of Reliance Industries main the bidding broke. However then got here the information that, as a part of the deal value over Rs 3,650 crore, all the worth of current shareholders can be written off. Not solely this, the inventory will even be delisted from the alternate.

That stated, the lenders would get a 15 % fairness stake within the firm, although the insolvency decision deal didn’t reveal many particulars as to how a lot can be repaid to which particular lenders.

Reliance Industries was one of many bidders

As per the decision plan of Reliance Industries Ltd. collectively with Asset Care and Reconstruction Enterprise Ltd., it’s proposed that the prevailing share capital of the corporate might be decreased to zero and the corporate might be delisted from the inventory exchanges, i.e. BSE and BSE. NSE,” the alternate submitting stated.

By the way, dilution of all the worth of fairness shareholders in corporations admitted to insolvency proceedings will not be new. Earlier, fairness shareholders of Amtek Auto, Kingfisher Airways, Essar Metal and others accepted insolvency proceedings and misplaced their total funding.

How is chapter enjoying out?

The insolvency proceedings against Syntex Industries were initiated in April last year.

Syntex Industries did not honor its mortgage repayments of over Rs 7,000 crore to a consortium of lenders led by Punjab Nationwide Financial institution (PNB) in 2021. Negotiations with Welspun Company for a doable takeover additionally failed, and finally, the Nationwide Firm Legislation Tribunal (NCLT) bench of Ahmedabad accepted proceedings towards Syntex for restoration of dues on April 6, 2021.

The NCLT had accepted the claims of Rs. 7,719 crore from monetary collectors. 74 crore from operational collectors, and Rs. 11 crores from workers of Syntex Industries.

4 corporations submitted their bids for Syntex Industries. Reliance Industries’ joint bid with Asset Care and Reconstruction Enterprise Restricted (ACRE) was accepted by the Committee of Collectors (CoC), who voted in favor of it via e-voting.

In a regulatory submitting, Syntex stated: “The e-voting on the approval of the Decision Plan had ended yesterday, i.e. on 19.03.2022 at 10.00 PM, and submitted by Reliance Industries Restricted collectively with Asset Care and Reconstruction Enterprise Restricted The decision plan has been scrapped. The profitable decision plan has been duly accredited by 100% of the COC members underneath Part 30(4) of the Code, topic to the approval of Hon’ble NCLT Ahmedabad.”

Why purchase?

Some traders, regardless of figuring out that the worth of Syntex’s fairness shares can be fully written off, nonetheless purchased it. It’s a matter of concern that we nonetheless have some shoppers who’re nonetheless shopping for Syntex shares after the nudge that the inventory value will go to 0 and a TOTP might be necessary.

Not solely Syntex Industries, folks additionally purchased shares of Syntex Plastics Expertise Ltd.

Why should not you do that?

The 52-week high-low is a well-liked market phenomenon based mostly on the worth of a inventory touching an annual excessive or low. Quite a lot of merchants and traders use this metric to purchase and promote their investments, and a few have even tuned their buying and selling software program to mechanically execute trades utilizing this metric.

However you should not use this metric to purchase Syntex (each plastics and industrial) shares proper now as they’re buying and selling at 52-week lows. Bother for one group firm often means hassle for an additional group firm.

As of now, buying and selling in Sintex Industries shares is suspended, however is open in Sintex Plastics Expertise. As on March 22, 2022, shares of Syntex Plastics had been traded at Rs 49.56 lakh (Rs 26.67 lakh as on March 23 at 2.18 pm) on NSE.

The Syntax Story:

Because it became a multibagger inventory, Syntex Industries turned a family identify within the funding group. In 2016, Syntex’s promoters determined that they need to separate their core and non-core companies with the intention to unlock extra worth for shareholders. Thus, it created two listed Syntex corporations, specifically Syntex Industries- Textile & Yarn, and Syntex Plastics Expertise- Plastics, Molding, Prefab and Infra.

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