ICICI Bank is now the single largest shareholder ahead of promoter Manoj Tirodkar after it assumed a 29.3% stake in the debt laden company GTL. The shares were acquired at a value of Rs 68.2 and at this price the bank has been able to recover Rs 194 crs of the Rs 500 crs that GTL owes it. The total number of shares acquired were28.5 million shares. The promoters’ Global Holding Corp has pledged 99.1% of its 52.18% stake or 50.75 million shares in the company and it would be a matter of time before other bankers would also exercise their lien and take over the shares pledged with them.

This brings us to the question as to what would happen next. Would there be a need for any open offer to be made as in the case of Great Offshore. The happening of Satyam changed the way the Indian Companies Act functions and it make became mandatory to disclose the pledge of shares on a regular basis. In the case of GTL the management control does not change because ICICI Bank has not acquired shares of GTL but they have come to it by default on account of the inability of the borrower GTL to return the money. There would be no need whatsoever to make any sort of open offer by any party now or later if more pledged shares are transferred.

The next course of action would be taken by a consortium of banks. The major liability is on the books of GTL Infra which is a subsidiary of the parent GTL Limited. This company is in the business of owning telecom towers and the lender consortium would now expedite a “slump sale” of the tower business which would reduce the debt on the books and therefore the interest outgo of the company. Currently the company is bleeding very heavily and GTL Infra made a net loss of Rs 139.29 crs for the year ended March 2011.

The share price of the company fell dramatically from Friday the 27th of June from a close of Rs 406.95 to Rs 90.75 on the 30th of June. In a mere 10 trading sessions the share price had fallen Rs 316.20 and become a mere 22.3% of its original price. The market sure punished the stock and one is not sure where the pledged shares have gone and whosoever sold them, how come the shareholding pattern does not reflect the same.

Very clearly corporate governance even post Satyam continues to be pathetic and it appears management just does not want to become transparent come what may. They still believe they can run things any which way they like and they are accountable to none.

What should shareholders expect from these companies going forward?

One should expect that there will be urgency in finding a buyer for the tower business and transferring the assets and liabilities of the company to the buyer. As the company has already filed for a CDR (corporate debt restructuring) package, it would make things easier for the restructuring and the sale. Investors should expect the share price to recover from these levels but they should understand that at the end of the day the company is a loss making company and effectively has no promoter who could bring in the money to help in the restructuring of the company. Secondly all the promoter shareholding is pledged and there is no way that there can be redemption or the lien on the pledged shares can be removed.

In conclusion the counters of these two shares would continue to be volatile, news driven but there is no way that any open offer of any sort can come in the near future.