Saturday, February 4, 2012

Karuturi Global - Promoters Pledge Further Stake

By Special Correspondent

Karuturi Global Ltd (BSE: 531687, NSE: KGL) has disclosed in BSE yesterday that one of their promoter group companies have pledged all their shares on 2nd February 2012.

The development was disclosed to the company by promoters on 3rd February.

The Karuturi promoter group company that pledged shares on Thursday is Rhea Holdings Pvt. Ltd., which pledged its entire holdings of 79.94 lakh shares, which is around 5.50% of the total promoter stake.

The pledge is in favour of ACG Pampac Machines Pvt. Ltd. Earlier, in Q3, another promoter group company had pledged nearly 24% of the total promoter stake in favour of ACG Pampac Machines itself.

In India, promoters usually pledge their shares to raise money at high share prices. Karuturi Global has been ruling near its short-term highs, near its Weekly and Monthly Highs between Rs. 5.84 and Rs. 6.00 respectively. Estimating by Thursday's close price, Karuturi Promoters seems to have raised around Rs. 4.50 crore at maximum, or more probably much lower, by this latest pledge.

Share pledges by promoters are often viewed by the market negatively, as the logic is that pledges signal that intermediate highs are already reached. Some promoters also use such pledges to lock-in gains, in case share prices start a downward trend.

Karuturi Global counter has been witnessing FII sells for some quarters now, and the latest to cut exposure significantly was BNP Paribas Arbitrage, in Q3.

The market is also keenly watching whether another three FIIs will sell as soon as their lock-in expires on one-year completion, as the Karuturi scrip had suffered a huge fall in price, and had failed to bounce back with the market, which is mainly attributed to the serious headwinds and controversies facing this floriculture major in its new foray into in the African nation of Ethiopia.

Karuturi Global has been world’s leading producer of cut roses for a few years now.

The lock-in for these three FIIs, which started from February 14th 2011, prevents them from selling their stake now. All three had been allotted shares through warrant conversion at Rs. 12.

Among these three FIIs is India Focus Cardinal Fund, which at 8.18% stake is Karuturi's largest non-promoter shareholder. India Focus Cardinal, which is facing serious regulatory action and ban from Indian market, by SEBI, due to their alleged involvement in the GDR manipulation scam, had recently appealed at SAT to allow them exemptions to sell select scrips from their holdings including Karuturi Global. SAT has allowed this appeal, which means India Focus Cardinal is free to sell Karuturi shares as and when the lock-in expires.

Karuturi Global's Q3 financial results is expected on February 11th.

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