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| L&T raises $600 million through QIP, FCCB |
| BS Reporter / Mumbai Oct 09, 2009, 00:49 IST |
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The proceeds will be used to fund expansion plans.
Larsen & Toubro (L&T), the engineering and construction behemoth, has raised $600 million (approximately Rs 2,780 crore) through qualified institutional placements (QIPs) and issue of foreign currency convertible bonds (FCCBs).
The $400 million share sale to qualified institutional buyers at Rs 1,659.30 has been completed at a 1.1 per cent discount to Wednesday’s closing price of Rs 1,677.25. The $200 million bonds, with a coupon rate of 3.5 per cent, have been issued at Rs 1,659.30, a 15 per cent premium to the base price of Rs 1,660. It will be mature in 2014.
“The proceeds of the issues will be utilised for growth capital. There are opportunities coming up in power, hydrocarbon, railways, road, port, airport, water management technology and urban infrastructure. The funds will help strengthen the company’s financial position and allow it to bid for large upcoming projects. The fund will be utilitsed within 12-24 months,” said L&T executive president (finance) R Shankar Raman.
 L&T has benefited from a construction boom in recent years as India revamps its airports, roads and adds industrial capacity, and currently holds an order backlog of around Rs 80,000 crore.
A month before, Chairman A M Naik told shareholders the company expects to win fresh orders worth $2 billion in the next few weeks. The company had earlier expected a 25 per cent growth in order book for the financial year 2009-10.
The QIP allotment would be completed by October 21. The fund raising will dilute L&T’s equity capital by 1.9 per cent. Citi is the lead book runner for both the deals.
Shares of the company, which the market values at $21 billion, fell as much as 2.8 per cent in a choppy Mumbai market after the announcement. It closed at Rs 1,649.80, down 1.65 per cent.
Moody’s Investors Service said L&T’s rating was unaffected by the $600 million fund-raising. “While a step in the right direction, the announced equity and FCCB issues will only have a limited impact on L&T’s consolidated credit metrics, given that the company will require additional funding to support its large expansion plan over the medium term. Therefore, this fund raising exercise has no immediate impact on its rating or rating outlook,” said Ivan Palacios, Moody’s analyst.
L&T’s consolidated debt stood at Rs 18,400 crore as of March 2009. Although the equity and FCCB issuance would partly fund the company’s expansion plan, Moody’s expects the group’s consolidated debt to increase over the medium term as it enters new ventures, and expands its activities in financial services and infrastructure development sectors.
The company had a cash reserve of Rs 4,000 crore in March this year. Later, it received Rs 1,200 crore from the sale of 11.5 per cent UltraTech shares to Grasim Industries, an Aditya Birla Group firm. The company has capital expenditure plan of Rs 1,500-2,000 crore this financial year.
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