L&T Shipbuilding Ltd (LTSB), a subsidiary of construction major Larsen & Toubro (L&T), plans to raise up to Rs 3,000 crore through non-convertible debentures (NCDs).
The company will predominantly use the NCD proceeds to repay its existing bank credit.
Rating agency CRISIL has assigned ‘AAA (SO)/ Stable’ rating to the NCD programme of L&T Shipbuilding, based on the unconditional and irrevocable guarantee from parent company L&T and the trustee- administrated payment mechanism.
LTSB will use the proceeds from the NCD issue to repay its existing bank facilities. CRISIL will withdraw the rating on bank facilities once the full payment is made and on receipt of necessary documents,
According to the payment mechanism, if LTSB does not deposit the requisite amount in the designated account two business days prior to the due date, the trustee will invoke the guarantee. Then the guarantor, L&T, will fund the account one business day prior to the due date, to ensure payment on the due date.
LTSB is a 97:3 joint venture between L&T and Tamil Nadu Industrial Development Corporation Ltd.
LTSB was set up to develop a shipyard for construction and repair of defence and commercial vessels and also to set up a minor port at Kattupalli (Tamil Nadu).
The total project cost of Rs 3,375 crore is being funded in a debt-to-equity ratio of 75:25.
However, there has been an increase in the project cost by Rs 614 crore due to widening of scope. The cost overrun was primarily funded by L&T in the form of equity.