The warrants held by these debentureholders entitle them get up to 120 million equity shares. This was always expected as the pending conversion and pricing had been disclosed earlier. But the conversion price of Rs 75 for one equity share is currently viewed as being very low. And this is a negative factor as far as the stock is concerned. One, it is very likely that all the warrants will be exercised so there will be a maximum equity dilution of 13 per cent. Second, if any of the debentureholders are shareholders at present, it will be tempting to sell now at the high price of Rs 180.

The other possibility is if none are shareholders and obtain shares at Rs 75 in January 2000, in which case the equity will be dumped in themarket then. However, this is only the most logical outcome, but not the most likely outcome. If one goes by recent examples, it is quite likely that exactly the opposite will happen. In the case of ACC, rights were issued at Rs 55, against a market price of Rs 110. Despite the equity increasing by 25 per cent (much more than the Reliance dilution) the stock has returned 80 per cent since the issue. The Reliance warrant conversion could very well follow a similar path.

Floatglass India

That Floatglass India is slowly but surely on the road to recovery is becoming clear. Though the company has not been able to stop the flow of book losses, the tempo of the same has certainly slowed down. The accumulated losses still stand at over Rs 200 crore and the company continues to remain as a potentially sick company.

But two main features emerged from the last year's performance. One, there was a marked improvement in both the demand for as well as in the realisations for floatglass. And two, the companyhas continued to replace high cost debt with low cost ones or with preference capital (Rs 35 crore was brought in through this route by the Japanese parent company, Asahi Glass).

The result of the above developments were two-fold. One, there has been a steep jump in operating profit from just Rs 9 crore last year to Rs 20 crore in 1998-99. And second, the reduction and substitution of high cost debt has worked to substantially reduce interest costs, contributing to lower net losses.

The performance, especially the topline growth, has to be considered in the backdrop of the state of the floatglass industry. The floatglass industry has been hit by large imports from Indonesia, which has hampered development efforts in what is a nascent but premium market. Despite that handicap, capacity utilisation improved to 65 per cent.

The industry, which has other organised players such as Gujarat Guardian Glass (a joint venture with Guardian Glass of the USA) has decided to seek protection from dumping. Theimposition of any such measures can only be of benefit to these players and could make the difference between survival and becoming a BIFR case.

The Floatglass stock also does reflect the market's optimism, despite the odds against it. For a company that is close to being declared sick, the stock trades close to its face value of Rs 10.