CLSA to buy 14% stake in Apar Inds

CLSA Private Equity Fund today agreed to acquire a 14.2 per cent stake in Apar Industries for Rs 63.75 crore through subscription of convertible preference shares.

Apar Industries managing director Kushal Desai said the company would offer 34,45,978 cumulative compulsorily convertible preference shares of Rs 185 a share to Shinny Ltd, a subsidiary of ARIA Investment Partners II, LP (a fund managed by CLSA Private Equity).

The shares carry a coupon rate of 5.5 per cent and would be converted into equal number of equity shares within a year. ICICI Securities advised Apar Industries on this transaction.

Desai said the Rs 1,000 crore speciality oil and aluminum conductors maker would utilise the fund to meet its requirement for capital expenditure as well as working capital.

"The company plans to increase capacity of its three line of productions. In addition, the company needs more working capital as prices of raw materials have gone up. The company would spend Rs 45 for capital expenditure and the balance to meet its working capital requirement."

He added that the company would seek shareholders' approval for the proposed offer at an extra ordinary general meeting on September 30. Apar will also increase its authorised share capital from Rs 75 crore, comprising 2.60 crore equity shares of Rs 10 each and 4.9 crore preference shares of Rs 10each, to Rs 91.99 Crore.

The equity share capital will remain unchanged while the proposed change in the authorised share capital will be due to increase in preference shares.

Upon conversion, the promoters stake will come down from 70 per cent to 60 per cent. The Apar Industries stock today closed at Rs 224 on the Bombay Stock Exchange.

Asked why the company agrred to offer preference shares at a discount from the ruling market price, Desai said the price of the preference shares was based on the Sebi formula.

"In fact, the pricing is slightly higher if you go by the Sebi rule. However, the markets have been going up and up for the last few trading session. Therefore, today's closing was higher than the offer price of the proposed preference shares," he said.

CLSA Private Equity is a specialist private equity investment management firm, focused on Asia. Based in Hong Kong and Singapore, CLSA Private Equity is wholly owned by CLSA.