Jindal Strips Plans To Place Equity

Jindal Strips Ltd (JSL), part of the Rs 3,000 crore O P Jindal group, is planning a private placement of equity with the institutions and investment funds. The move is aimed at raising funds for the company's proposed growth plans, besides bringing down the company's current debt equity ratio.

Besides, the Jindal group company has also finalised plans for going in for a securitisation of its export earnings to raise about Rs 200 crore. It is currently in the process of finalising the bank for the proposed securitisation programme.

According to company sources, as a prelude to the private placement and securitsation plans, JSL has asked Icra for a rating of the company's long term debt instruments.

 

"We hope to get a better credit rating based on our current performance and the company proposes to firm up the plans for equity capital expansion and other fund raising plans including securitisation once the rating is obtained," a senior JSL official said.

Company officials, however, refused to divulge the size of the proposed private placement. It is, however, understood, that the company proposes to raise its equity to Rs 40 crore from the current Rs 18 crore in a phased manner and the private placement will be done at a high premium. JSL scrip is currently being traded at a price band of Rs 124-130 on the bources.

JSL currently has a total debt of about Rs 600 crore. Its paid up equity, however, is only Rs 18 crore. Its current debt equity ratio stands at 1.6:1. "Our target is to bring down the debt equity ratio to 1:1 and this will be done through a combination of equity capital expansion and retiring part of the debts," the JSL official said.

The move on the private placement of equity comes close on the heels of the company raising $30 million through a foreign currency convertible debentures (FCCD) end last year. The FCCD is fully convertible at the end of five years (2004-end) and on conversion will bring down the stake of the Jindals in the company to about 45 per cent from the current level of 54 per cent.

According to company sources, the proceeds from the proposed securitisation is to be used for retiring the high cost debts of the company. JSL, which has already brought down the average interest of its debts to 14.5 per cent from the earlier level of 15.75 per cent, is now planning to bring it further down to 13.5 per cent.

The debt retirement will help the stainless steel maker to save significant amount of interest ourflows. Its current annual interest outflow is to the tune of Rs 85-90 crore.