Geodesic In Deep Trouble

If investors could recollect, a few months back, our team at Dalal Street Investment Journal did a story on which stocks to avoid under our cover story column. In our cover story “Disguised To Mislead’, we had categorically mentioned names of few companies to avoid along with respective reasons behind the same. In the story, we had mentioned Geodesic as one of the counters to avoid and the reason was the default by the company on Foreign Currency Convertible Bonds (FCCBs).

In our analysis we had categorically stated that the company has already run up to more than Rs 1200 crore and has defaulted its payment of FCCBs. In addition, all the independent directors had resigned and no new independent directors were appointed. Moreover, its accounting was in a mess till the start of 2014. What added to the worries was that, the FCCB holders, through their trustees had asked for a liquidation of the company.

While the matter remained subdued for some time, another problem seems to be emerging on the horizon. According to reports, The Bombay High Court has ordered Geodesic to deposit USD 162 million (approximately Rs 972 crore) in a Citibank branch in London or Singapore by April 28 for its failure to redeem foreign currency convertible bonds (FCCBs).

In our analysis also we had mentioned about the likely payment of USD 157 million and additional interest on the same. However, as the matter was under court consideration, no prescribed time was mentioned.

As regards to the details of the order, the order dated April 7 came on a petition filed by Citibank, which is the trustee of bond holders stating that any failure to comply with the order will force it to appoint a provisional liquidator for recovery of the dues.

Commenting on the order, Justice GS Patel stated that, “The order I have made may seem drastic, but I believe that is necessary for two reasons. The first, of course, is to protect the interests of bondholders”. We tried to get in touch with the Geodesic spokesperson, but failed to get any reply till the article was being published.

We feel, this would make a negative impact on the company as it seems highly difficult for the company to raise funds in the current scenario. Hence, we still stand by our call to avoid the counter at current levels.