Share Warrant

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Dhanraj (Querist)
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28 July 2009 Dear experts

Could you please tell me what are share warrants and what is the purpose and benefit of issuing share warrants??

Thanks

Rasesh

Rasesh (Expert)
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28 July 2009 Share Warrants are instruments convertible into equity shares at the end of a specified period (not exceeding 18 months). The major benefit to the subscriber of the SW is that the subscriber has to pay only 10% of the convertible value of the shares at the time of subscription and the balance 90% at the time of conversion.

In case the subcriber does not opt for conversion of SW into shares, the issuing company has the right to forfeit the 10% amount paid by the subscriber.

To the Company, it is benefitial as it gets funds without any interest liability. The conversion happens at the end of 18 months at a predetermined price with commitment from the subscriber (to the extent of 10%) which means that the dilution of equity happens at a later stage.

Please refer SEBI guidelines for the procedure for issuing SW