CHENNAI, February 23: In a volte face, cement major India Cements Ltd (ICL) has decided to come out with an equity offering aggregating Rs 150 crore to shore up its borrowing capacity. This move by the company, after maintaining all along that its expansion plans would be taken care of by debt and internal accruals, has led to further speculation in the market about the possibility of the company acquiring Raasi Cements.The company's board of directors on Monday approved the equity issue with an overall ceiling of Rs 150 crore. It has delegated the necessary powers to the managing director and the executive director to decide the quantum of the issue, the amount of premium and the timing of the issue in consultation with the merchant bankers.
Company officials, however, added that a significant portion of the issue could be in the form of rights and the balance would be through private placement. Though they were tightlipped as to the sudden move by the company to improve its equity base, they said theresolution passed was an enabling resolution and that the money would be used in connection with the `cement business'. What has interested the players in the market is the timing of the issue. The ICL scrip is presently quoting close to its 52-week low and if the trend in the industry is any indication, there is little scope for any significant increase in the share price, especially after the announcement of an equity dilution.
Moreover, the company had all along been saying that there would not be any dilution of equity to take care of its expansion plans `on hand' which include Yarraguntla, Visaka Cement Industries and captive power plant. Vice president and managing director N Srinivasan had echoed this view when he met the press in November-end.
He had then stated that ICL had already tied up its fund requirement by way of private placement of 13.1 per cent non-convertible debentures to the extent of Rs 100 crore and the banks and the financial institutions had sanctioned Rs 300 croreassistance.
``In view of the above, the company does not anticipate any problem in funding the various projects on hand,'' the press release issued then had said.
Official reasons apart, the money raising activity seems to be aimed at acquiring Raasi Cement. This seems to be the objective in view of the management's earlier claim that they had already tied up the funds for their expansion plans and captive power projects. However, a takeover will not be easy. This is because the promoters of Raasi Cement hold 37 per cent of its equity and the option of a preferential allotment can always be exercised to hike the stake.
It will not be surprising if Raasi announces preferential offer before India Cement works out the modalities of a rights issue.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
