India Cements Plans Rights Issue To Fund Takeover To Be Funded

The acquisition of Raasi Cements will be funded largely through equity expansion, in all probability through a rights issue, Indian Cements Ltds N Srinivasan said. We are keen on non-interest bearing money, he said in an interview.

The company has a current debt-equity ratio of about 1.8 and we would like to bring it down further to 1.5, he said. Countering the criticism of dilution in companys equity base, he said, a Rs 80 crore equity (current base is Rs 64.63 crore) is still small considering the company will have cement capacity in the region of 7 million tonnes.

I want the Raasi shareholder to sell and then invest in India Cements Ltd as there is bound to be a further appreciation in ICL shares, he said. Confident of getting a good response, he said the company can easily afford to do so given the proposed equity expansion and internal accruals. Sale of non-core assets is also not ruled out.

 

The offer price is intended to be irresistible even to FIs which have a stake in Raasi Cement. At Rs 300, this is a once in a life-time offer for Raasi shareholders even as it is a good deal for India Cements.

For India Cements, the total acquisition cost thus far, including the public offer at the offer price of Rs 300, is just Rs 145 crore.

The subsidiary companies of India Cements have also created an escrow account for Rs 25 crore being more than the 25 per cent of the total consideration payable. This guarantee is valid till June 22. The company has also made a Rs 1 crore deposit with Bank of America. After all acquisitions, India Cements will have a 35 per cent market share in the south and the nearest competitor has a 10 per cent share, Srinivasan says.