Siyaram Silk Mills "Special Reward" to Shareholders – Shall Issue Preference Shares as Bonus Shares

Recently Siyaram Silk Mills Limited announced issuance of compulsorily redeemable preference shares as a bonus” to all the equity shareholders.

- Anirudha Jain

Siyaram Silk Mills Limited ("The Company" or SSML") is engaged in the business of manufacturing, branding and marketing of fabrics, readymade garments and indigo dyed yarn. The equity shares of the Company are listed on the nationwide bourses.

Proposed Transaction:

As Siyaram's embarks on the pathway to its golden anniversary three years hence, the Board of Directors of the Company has proposed a special reward for its shareholders. As part of this process, the Company has announced the issuance of cumulative non-convertible redeemable preference shares ("CNCRPS") by way of a bonus to all equity shareholders through a Scheme of Arrangement ("Scheme").

The issue size will be 318 Cr and will be issued from the general reserves/ retained earnings of the Company.

Please note that the company will issue two types of CNCRPS for every 1 equity share:

4 [Four) Preference Shares - Series | of face value of INR 10 each fully paid up for every 1 (One) equity share of INR 2 each fully paid up held by such shareholder; and

3(Three) Preference Shares - Series II of face value of INR 10 each fully paid up for every 1 (One) equity share of INR 2 each fully paid up held by such shareholder.

Basically, the only difference between is Series | CNCRPS & Series II CNCRPS will be redeemed at the end of 3rd & 5th year respectively. This must have planned considering the availability of sufficient cash flow with the company for redemption.

Rationale for Issuance of preference Shares:

>> Over the years, the Company has built up substantial surplus reserves from its profits. The surplus reserves are well above the Company's current and likely future business needs.

>> The Company is of the view that these excess funds can be optimally utilized to reward its shareholders.