More trouble seems to be lurking for the promoters of Kouton Retail India (Kouton). ECL Finance, a subsidiary of Edelweiss Capital, invoked shares pledged by the promoter group entities aggregating around 10% of Kouton equity. As of the quarter ending September 30, promoters and promoter group entities of the asset light-debt heavy apparel retailer had pledged over 54%, up from 29.25% as of previous quarter. Promoters were holding 59.50% stake in the company as of the quarter ending September 31, 2010. The apparel retailer had recently said that it had a cumulative debt of Rs 660 crore on its books. As of quarter ending June 30, the company had a paid up equity capital of Rs 30.54 crore and zero reserves. Kouton stock is plumbing the bottom compared to its peak of Rs 450.
Kouton, in a recent regulatory filing, had said that ECL Finance had invoked and transferred 29,65,640 equity shares, which translates into 9.7% of the total outstanding share capital of the company. This, according to sources, would effectively bring down the promoters holding in the company to below 50% from the current 59.50%. An e-mail sent to the company by FE failed to elicit a response. ?The latest development (invoking of pledge by ECL Finance) shows that they will not be able to raise any further cash from lenders. On top of it, they may also face margin calls since the stock has lost considerable ground during the past few months. It is difficult to put the trigger, since the exact price at which they pledged the shares is not made public,? an analyst with a local brokerage house, who does not wished to be named, said.
Sources said that normally the lender must have dumped the stock in the open market to recover their dues since the maximum loan amount would be 60% to 70% of the then value of the stock. But in this case, ECL Finance had decided to convert the loan into equity to prevent the stock from crashing further. The apparel retailer is facing a severe cash crunch and its suppliers had taken the company to Delhi High Court to recover the dues
