L&T raises $600 m via QIP, FCCB

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Mumbai: Larsen & Toubro Ltd (L&T) has raised $400 million (around Rs 1,880 crore) through qualified institutional placements (QIPs) at 1% discount and another $200 million (around Rs 940 crore) via foreign currency convertible bonds (FCCBs) for five-year tenure at 3.5% coupon and at a premium of 15%. The proceeds of the funds will be used towards power plants, ports, ship building and nuclear forging.

R Shankar Raman, executive vice-president (finance), L&T told FE, “This is to keep our balance sheet ready with funds to enable us to bid for future projects in infrastructure and power. This includes manufacturing super critical broilers, turbine forging, shipyard for defence services, road and airport development mainly through built-operate-transfer (BOT) projects and also for projects through public private partnership (PPP) route. The funds that we have raised is basically growth capital.” It was in November 2007 that L&T had raised over Rs 2,000 crore through global depository receipts and an equal amount through external commercial borrowing to fund its ongoing projects in infrastructure and power sectors. The funds are currently being utilised as the projects are being built and the investment tenure for these funds are ending in 2011-12, Raman said. Raman added, “L&T has been growing at the rate of 35% as on March 2009. We hope to grow the overall revenues from Rs 34,000 crore to Rs 38,000 crore by the year-end.”

Shares of L&T closed at Rs 1,644.90, down 1.94% on the Bombay Stock Exchange. .

Meanwhile, Moody’s Investors Service said L&T’s Baa2 issuer rating and negative outlook are unaffected by the company’s $600 million fund-raising announcement.

“Moody's had already factored a potential equity issuance of $600 million into its analysis when it changed the outlook on L&T’s issuer rating to negative on 20 August 2009,” said Ivan Palacios, Moody’s lead analyst for the company . “The equity and FCCB issues only will have a limited impact on L&T’s consolidated credit metrics, given that the company will require additional funding to support its large expansion plan over the medium term. Therefore, this fund raising exercise has no immediate impact on its rating or rating outlook,” added Palacios .