The Hindu Business Line : Ashok Leyland board okays share split plan

ASHOK Leyland's board has approved two resolutions, one to subdivide the company's Rs 10 equity shares into 10 shares of Re 1 each, and another to allow shares to be reconverted into Global Depository Receipts.

Explaining the implication of the "reverse fungibility" measure, a senior official of Ashok Leyland said many institutions abroad wanted to take part in the growth of Indian stocks but did not want to take exposure in the country. Pension funds, for example, may have restrictions in investing abroad but might still want to be able to buy shares of good Indian companies.

Ashok Leyland came out with a Global Depository Receipt (GDR) issue in 1995 for $115 million. Three shares comprised a GDR, and each GDR was priced at about $12.38. In the subsequent years, most of the GDRs were converted into equity shares, after which they were allowed to be traded only on Indian stock exchanges. The GDRs' equivalent of some 15 lakh equity shares was issued, of which only about 3 lakh equivalent shares have been retained as GDRs.

Now, enabling the foreign investors to reconvert the shares into GDRs, at current market prices, would enable them to trade in them. Overseas investors (such as pension funds) could buy the GDRs. The reconversion would, therefore, create a demand for Ashok Leyland shares.

The move to divide the Rs 10 share into 10 shares of Re 1 each would also enhance the liquidity of the shares on the Indian stock exchanges. This is important because only 56 per cent of the shares held by public are held in demat (electronic) form. All the rest are held as physical share certificates.

The stock split would enable even those shareholders who hold the shares in physical form to sell a part of their holdings and keep the rest.

Ashok Leyland will convene an Extraordinary General Meeting of shareholders on February 28, to seek their approval for these resolutions.

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