Sterlite raises $500 m in debentures; shares plunge

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Mumbai: Shares of Sterlite Industries (India) Ltd, India’s largest copper producer, fell the most in two months on the Bombay Stock Exchange (BSE) after the company sold $500 million of convertible debentures to finance its copper expansion plans. Sterlite shares opened at Rs 835.35 on Friday and touched it’s lowest at Rs 790 during intra-day trade, to close at Rs 820.90 on the BSE, down 5.44%.

Experts say the company has raised money in the past too for its expansion and increased stake in Balco and HZL, but there has been little progress in these projects.

Even the Asarco deal — for over a year, Sterlite has been locked in a bidding with Grupo Mexico SAB for bankrupt copper miner Asarco LLC — seems to be slipping from Vedanta's hands, they said. “Hence, this fund-raising is being perceived negatively by the markets. Vedanta has to make some headway in its projects,” said Rahul Singhvi, an analyst with Sharekhan.

A unit of Vedanta Resources Plc, Sterlite on Friday said it has raised $500 million in convertible senior notes and plans to use the proceeds primarily for expansion of its copper business. This offering is the highest premium equity-linked offering both for an Indian corporate and in the US market in the year 2009 to date. This has also been the first-ever equity linked offering of its kind for an Securities and Exchange Commission-registered Indian company.

In a statement, Sterlite said, “The company intends to use the net proceeds from the offering for expansion of its copper business with allied power plant, acquisition of complementary businesses outside of India and any other permissible purpose under, and in compliance with, applicable laws and regulations in India, including the external commercial borrowing regulations specified by the Reserve Bank of India.”

The notes are convertible into American depository shares at $23.33 per share, which represents a premium of 37.5% to the then prevailing price. They carry a coupon of 4% and mature on October 30, 2014, Sterlite said in a statement.

Deutsche Bank and Morgan Stanley are acting as joint book runners for the offering.

According to the company, “The offering generated a demand of $2 billion from over 100 investors. It was subscribed within three hours of opening.”

In July this year, Sterlite had raised $1.5 billion (over Rs 7,000 crore) from the American market as equity to finance its power projects.