Hindustan Copper Ltd will go for a follow on public offer (FPO) to fund its proposed expansion, whose capex has shot up from Rs 3,435 crore to Rs 6,000 crore. The copper mining and manufacturing PSU has a public float of 10.05%, not conforming the SEBI rule of PSUs having to have a public float of at least 25%. KD Diwan, chairman and managing director said although the company was 4 years behind schedule in completing its proposed expansion projects, it added two new projects; a Rs 2,200 crore Hydro Metallurgy Project and a Rs 7 crore Nickel plant at Rajnandangaon in Madhya Pradesh, to its existing expansion plan. For this the company would need to hit the market for funding the additional expansion.
He however didn’t tell as to when the company planned to launch the offer. Although the company has been talking of a need to issue public offer both for raising capital as well as meet the SEBI guidelines, the government has not pushed Hind Copper’s FPO plans.
While the company took up mine expansion projects in 2012 to quadruple its capacity from 3.4 million tonnes per annum to 12.4 mt per annum by 2017. However, at the end of FY16, the company has been able to increase it ore production to 3.9 mt from a level of 3.4 mt. The projects have been delayed mainly for hurdles in obtaining statutory clearances, Diwan said.
“There is a marginal cost over run for the delay but the two new projects; Hydro metallurgy and Nickel plant has pushed up our capex from Rs 3435 crore to Rs 6,000 crore. The two new projects will have to be funded with a mix of FPO proceedings, debt and internal accruals,” Diwan said.
The company, debt free till 2015, at present has a debt of Rs 250 crore. The Hydro Metallurgy will save us on the cost of fuel and the Nickel plant has high rates of return with potential to fetch returns of Rs 215 crore a year on an investment of Rs 7 crore only, Diwan said.
While HCL would need the Cabinet Committee on Economic Affairs’ (CCEA’s) nod to implement the new projects, the company was hopeful in installing its new projects in the next three years. “We will be able complete our proposed expansion by 2020,” Diwan said.
He said the company has already entered into joint venture agreement with the Chhatisgarh government owned Chhatisgarh Mineral Development Corporation Ltd for exploration, mining and beneficiation of copper and its associated minerals in the state.
While the state would not pump in any money to the project, as a partner it would facilitate with land and various other statutory clearances for implementing the project.