In my opinion, we are talking failed enterprise which are not able to service debt. Of course in very optimistic bull market even turnaround companies can perform well, but they there higher riskiness nature as well. Secondly, there is very limited but a probability that new investor write down whole equity and delist the company. In such case, minority shareholders may have marginal value. I am again and again repeating that there is unfound optimism about getting resolution plan and HOPING that the company market capitalisaton is double/triple without realising that we expect lenders to take haircut. Why should new investor shall share a single paise wealth after taking all risk and investing money in failed enterprise?
Debt is suppose get repaid in case of liquidation in waterfall above the equity and equity is suppose work as buffer. However, I find most investors are wishing exactly otherway round, i.e. Lenders taking haircut equity value increases for minority shareholder !!! In fact, today I was inform that new investor may creat convertible structure/warrants issued to him, which provide him mechanism to sell new equity in market are higher value, and convert his warrent into equity (which would be priced at today SEBI determined fomrula, almost near to face value). In such structure, he can ensure that stake remain at 75% and he continue to exit from investment at higher price and subscribing warrant at near face value during 18 months period. This structure may fully comply with SEBI requirement of minimum 25% public holding.
I am not legal expert and SEBI registered advisor. In my limited understading, it would be better to invest the distress company after knowing the new management and structure, may be at three-four time current price, then to invest now when proability of very high loss of capital. Finally each investor need to evaluate his/her own risk profile and take call.
Thanks for your comment on the thread.