Chennai, Jan 3: Chettinad Cement Corporation Ltd is coming out with a Rs 60-crore rights issue to fund its one million tonne greenfield expansion plan at Palayam in Dindigul district, Tamil Nadu. The issue which will be at a premium (to be finalised in the next few days) is likely to hit the market in February or March this year.The project estimated to cost Rs 350 crore will be funded by a mixture of debt and equity. Apart from the Rs 60-crore equity component, the company plans to raise debt to the tune of Rs 250 crore with the internal accruals accounting for the balance. The company has given the mandate to SBI Caps for the Rs 250 crore debt portion and it is likely that the entire loan component would be raised from banks.
Chettinad Cement's current equity base is a low Rs 8.43 crore and its reserves stand at a healthy Rs 104.56 crore. For the six-month period ended September 30, 1999, it has posted a profit of Rs 17.02 crore on a turnover of Rs 112.06 crore. For the full year 1998-99, the turnover was Rs 196 crore and the bottom line was Rs 9.86 crore. The company's current capacity is a million tonne and is presently selling 70 per cent of its capacity to Tamil Nadu and balance in Kerala.
The work on the new project has already commenced and according to company officials, it is likely to be completed in about 15 months. The project, it is learnt, will also qualify for sales tax concession which has been scrapped with effect from January 1, 2000.
According to the latest order issued by the state government, those projects for which land has been acquired and loan application made before December 31, 1999 are eligible for concession provided the project is completed before December 31, 2001. Applicability of the sale tax concession will improve cash flow of about Rs 30 crore per annum which will go a long in helping the company meet its debt obligations. The scrip is currently trading at Rs 140 levels at the National Stock Exchange.
INSIGHT
excess capacity scenario
For the period from April to November 1999, Chettinad operated at 153 per cent capacity utilisation and for the month of November at 120 per cent. The plant, like the one-million tonne plant, will serve Tamil Nadu and Kerala. With this expansion, capacity addition in the south will go up to 7.7 million tonne in the next three years. The other expansions in the offing are L&T-2 mtpa, GACL-2 mtpa (both in AP), ACC-2 mtpa in Karnataka, Dharani-1 mtpa in Tamil Nadu and the 0.7 mtpa expansion of Madras Cements Ltd.
Urmik Chhaya
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.