GATI plans to replace old FCCB debt; Stock plunges 20%

NEW DELHI: Shares of GATI Ltd plunged 20% on Monday after the company announced plans to hive off its shipping arm into a separate subsidiary and to replace its old FCCB issue with a new one.

The company plans to sell 50 per cent stake in the shipping arm and get strategic investors post demerger.

The stock was locked at 20 per cent lower circuit at Rs 31.65 second day in a row on the Bombay stock exchange (BSE).

“The management has said that the company is not facing any cash flow constraints due to debt burden. It is in talks with new investors for the FCCB issue to issue $22 million and plans to replace the old FCCB debt with fresh funds,” said Mahendra Agarwal, MD, GATI, in an interview with ET Now.

The management is confident of closing the deal within this month.

Analyst Call: Deepak Mohoni, Director, trendwatchindia.com

Shares of Gati Ltd are locked up in a lower circuit for a second day in a row and even if it manages to recover half of this loss in tomorrow’s trade, still it is going to be at a seven-year low. This shows it is clearly a big thumbs down from the market.
Till 2008 Gati used to be a very strong stock . But it never managed to bounce back in the bull markets that followed, indicating that things are not exactly the same as it used to be in the past.

It only managed to climb to Rs 100 in 2010, when it had gone over Rs 200 two years back. So it looks like this stock is in a pretty bad downtrend.

For investors, therefore, it is best to stay away from the stock.