Indian Hotels To Raise Funds To Retire Debt

Indian Hotels Company has planned to raise additional resources to repay the company's existing high-cost loans. The company is planning to raise a maximum of Rs 250 crore through the private placement of five-year secured premium bonds with warrants.

The other alternative as specified by the company, which can also be exercised in addition to the private placement, is through a yen loan of a maximum amount of $25 million.

R K Krishnakumar, managing director, Indian Hotels, said: "We would like to take benefit of the prevailing low interest rates in the markets especially when our business outlook has improved in December."

Krishnakumar added that part of the loan can be used for routine capital expenditure and expansion programme as well.

Investors in the bonds will receive a coupon and also a redemption premium. The coupon and the premium taken together will give an yield-to-maturity of less than or equal to 10.50 per cent. The warrant attached with the bond will provide the investors the right to buy an equity share of the company between Rs 150 and Rs 200 per share -- after 18 months of the allotment.

However, if the investor exercises this right, he will not receive the redemption premium.

Post-warrant, the equity capital will marginally rise to Rs 47.25 crore from Rs 45.25 crore. The cheap loan is expected to raise the company's interest cost by Rs 15 crore annually and increase earning per share (EPS) by Rs 3.2-4.25. The EPS of the company for the year ended March 2001 was Rs 25.58.