Kesoram scraps preferential allotment, plans rights issue

The decision was taken in deference to the views and intent expressed by a cross section of shareholders

Kesoram Industries, a B K Birla group company, has cancelled a preferential issue and is opting for a rights issue “in deference” to the “views and intent” expressed by a cross section of shareholders.

The company informed the stock exchanges on Wednesday that the Fund Raising Committee of the board of directors of Kesoram at its meeting held today deliberated on various options to increase the size of equity raising in line with the long term objective of reducing debt and to give equal opportunity to all shareholders to participate in equity raising plan of the company.

The company said that the committee had approved cancellation of the proposed preferential issue to Usinara and would take steps for increasing the rights issue in deference to the views and intent expressed by a cross section of shareholders to participate in the rights issue and equity raise to be non-dilutive to their existing stake.

The proposed preferential allotment to Usinara – a company associated with promoter group entity– was Rs 100 crore.

P Radhakrishnan, whole-time director and chief executive officer, Kesoram Industries, explained that a cross section of shareholders comprising promoter group entities and minority shareholders wanted to participate in the equity raise and had suggested that a rights issue would be non-dilutive.

Promoter holding in Kesoram for the quarter ending June 2021 was at 45.97 per cent.

The board had earlier at its meeting held on May 14, 2021 approved a rights issue of up to Rs 200 crore out of proposed fund raising proposal for Rs 600 crores to be raised through one or more modes. But the committee at its meeting today decided to enhance the size of rights issue from up to Rs 200 crore to up to Rs 400 crore.

The company explained in its filing with the exchange that cancellation of preferential allotment and recommendation to increase the size of the rights issue would help in reducing leverage as the quantum of funds raised through rights issue was higher and money would flow in faster in a rights issue compared to a preferential issue. 

It would also help in reduction of high cost debt, improve the liquidity position of the company and enhance chances of upgrading its rating faster, the filing mentioned, apart from providing an opportunity to participate in the rights issue.