Apart from helping the companies to overcome the adverse impact of the latest RBI guidelines by broadening the capital base, the plan may also help the TVS group to put an end to the contentious issue of partly-paid shares held by the promoters.

The scheme, if approved by the High Court of Madras, will `save' the promoters a hefty slice of money. Instead of taking 8.80 lakh shares at the issue price of Rs 25 per share,, they will end up taking only 1.76 lakh shares. This is the number of shares accruing against what they have already paid, at the originally proposed rate of Rs 25 per share. As a result, the promoters will not have to infuse any further capital. The scrip is currently trading at Rs 9 at the National Stock Exchange.

Thepromoters had converted two category of warrants (category A and Category B) into equity shares at a premium of Rs 15 per share in September 1995. While shares allotted on conversion of Warrant A were fully paid, the promoters brought in only Rs 44 lakh (representing Rs 2 towards face value and Rs 3 towards premium per share for 8.80 lakh shares). The balance Rs 176 lakh was payable by March 28, 1997.

In the fifteenth annual general meeting (AGM) of the company held on August 22, 1997, the promoters sought the permission of the shareholders to bring in the money by March 31, 2000 `without any additional charges'. The shareholders, after protests, passed the resolution but only after extracting an assurance that the management will come back with a time frame for payment.

Interestingly, responding to shareholders' protests in the last AGM Chairman, Gopal Srinivasan had said that the promoters ``do not have the money as it was tied up in other projects'' and that even if the money was brought in, itsdeployment would be an uphill task. He also said that the move was an evidence of promoters' commitment on the price.

But situation now is very different. As per the latest RBI guidelines, the company has to reduce or repay close to Rs 86 crore of surplus deposits in the next three years, as per its current rating and net worth.

It is in the process of replacing fixed deposits with secured debentures and under the circumstances it would have made sense for the promoters to bring in the money and shore up the net worth.

But now they will end up taking only 1.76 lakh shares as 8.80 lakh partly paid up shares of Rs 2 each would get converted into 1.76 lakh fully paid shares of Rs 10 each. As per the scheme one fully paid up share in the new company will be allotted for every five Rs 2 partly paid up shares in Harita Finance Ltd. Thus they will not be bringing in the Rs 176 lakh (representing 7.04 lakh shares at Rs 25 per share) which they had promised to take and sought extention of time.

Seniorofficials of the company point out that they have not only broken any law, but have not acquired any more shares than what has been paid for. As such, the promoters have not `gained' anything, they said.