Ispat Inds Gets Nod For Rs 799cr Fcd Rights Float
Ispat Industies, the flagship of the M L Mittal group, has obtained the formal approval of the Cabinet Committee on Foreign Investment (CCFI) to make rights issue of fully convertible debentures (FCDs) totalling Rs 799.28 crore.
The CCFI approval states that each debenture worth Rs 100 issued by the company will be converted into four equity shares after the lock-in period of 18 months. The FCDs will carry a coupon rate of 15 per cent. The company had earlier submitted a proposal to issue debenture worth Rs 100 each to be converted into two equity shares after a period of 18 months.
Ispat Industries would issue 7.99 crore convertible debentures of Rs 100 each for cash at par on a rights basis in the ratio of one debenture for every two equity shares held.
The funds from the issue is proposed to be used to part-finance the company's Rs 4,792-crore 3 million tonne hot-rolled coil project alongwith a 300-mw captive power plant at Dolvi, Maharashtra. While the equity portion of the project is Rs 1,450 crore, the debt portion will be around Rs 3,342 crore.
The company had sought a blanket approval from the CCFI to go up to 28.9 per cent foreign equity holding after the FCD conversion into equity shares.
However, Ispat International's vice president (finance), Vivek Seth said that the increase in foreign shareholding would take place only if there is any shortfall in subscription to the issue which opened on May 8. He added that the promoters, the Mittal family, plans to meet any shortfall by bringing in funds from the overseas sources which would hike the foreign shareholding. Otherwise the foreign holding will remain at the present level of 12 per cent.
The promoters stake, which is at present 21.75 per cent, will continue to remain so after the issue.
According to the company proposal, the non-resident Indian equity post-issue has been indicated to be 28.79 per cent on a repatriable basis and another 1 per cent on a non-repatriable basis.
Seth said the crucial aspect of the issue will be the pricing. The converison price of the debentures will be in the range of Rs 15 and Rs 30 per share.
The share price of the company has remained at around Rs 17 which is closer to the lower end of the conversion price.
While the present FCD issue will contribute nearly Rs 799.28 crore to the total equity requirement of Rs 1,450 crore, the remaining portion of the equity will come from a public issue of Rs 335.71 crore, Euro convertible bonds worth Rs 215 crore and internal accruals to the tune of Rs 100 crore which have been planned by the company. The project has a debt equity ratio of 3.97:1.
The equity before the FCD issue is Rs 150.47 crore and the equity after the issue will be Rs 692.71 crore.
The first phase of the Dolvi project is expected to be completed in the last quarter of 1997, and the second phase in the last quarter of 1998.