PC Jeweller stock hits 10% upper circuit after PNB approves one-time settlement of dues

Shares of PC Jeweller were locked in a 10% upper circuit limit in today's early morning trade, reaching ₹56 apiece. This sharp rally in shares came after the company announced on Sunday that Punjab National Bank has given its approval for a one-time settlement of its outstanding dues.

In a regulatory approval, PC Jeweller informed that "Punjab National Bank, the third largest bank after the State Bank of India amongst consortium banks of the company in terms of its exposure, has conveyed its approval to the One Time Settlement (OTS) proposal submitted by the company."

PC Jeweller had opted for OTS to settle the outstanding dues with a consortium of banks. The terms and conditions of the approved OTS include cash and equity components payable under the settlement, the release of securities and mortgaged properties, etc., the filing said.

PC Jeweller did not mention the outstanding dues with all banks or the details of OTS.

Earlier, the company highlighted in its investor presentation that the withdrawal of the petition from the National Company Law Tribunal (NCLT) by SBI and the favorable consideration of its OTS proposal by the banks are positive developments.

As a result, the company has resumed its focus on enhancing its brand presence and has initiated new marketing efforts, expecting visible impacts in the first quarter of the current fiscal year. It maintains a network of 60 showrooms (including 6 franchisee showrooms) in 44 cities across 15 states in India as of March 31, 2024.

It is also revamping all other aspects of its business operations, such as preparing to launch new jewelry collections, revamping its franchisee business, and optimizing costs.

Meanwhile, the company's performance over the last few quarters was severely impacted by various litigations filed by banks in different legal forums, including the Hon'ble NCLT. As trust and goodwill are crucial in the jewelry business, these litigations and negative publicity hurt customer sentiment, leading to significantly reduced operations despite operational showrooms.

Consequently, the company experienced a drop in revenue and operational levels, resulting in losses at the EBITDA and PBT levels for FY 2024.

The company took a proactive step by convening a Board of Directors meeting on April 16, 2024, during which several key decisions were made. These included approving an increase in the authorized share capital and altering the capital clause of the Memorandum of Association.

Additionally, the board endorsed plans to raise funds through a rights issue of equity shares with a maximum size of ₹1,500 crore, subject to requisite regulatory approvals. Furthermore, it approved the issuance of fully convertible warrants worth up to ₹500 crore to a promoter group company.

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