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Mumbai: Larsen & Toubro (L&T) is planning to list the foreign currency convertible bonds (FCCBs), through which it raised $200 million (Rs 940 crore) on Thursday, on the Singapore Exchange Securities Trading Ltd. L&T had raised the FCCBs on October 9, for five-year tenure at 3.5% coupon and at a premium of 15%.
R Shankar Raman, executive vice-president (finance), L&T told FE, “Since most investors are Asia-based, such as in Singapore and Hong Kong, listing on the Singapore Exchange Securities Trading provides more administrative convenience. The funds that we raised and would be listing overseas is basically meant for growth opportunities in our business, especially in infrastructure and power projects.” He also said there is a need for proactive sourcing of funds when the markets are positive.
However, some analysts have a different view to offer. Shailesh Kanani, research analyst — infrastructure, Angel Broking, said, “Not enough trading happens on FCCBs in the overseas market due to absence of adequate liquidity. If L&T is planning to list FCCBs in the overseas market, it will be one of the rare Indian corporates to do so.” Shares of L&T closed at Rs 1,632.70, down 1.04% on the Bombay Stock Exchange on Friday. The main terms of the FCCBs offering on Thursday included face value of $1,00,000 per bond and initial conversion price of Rs 1,908.20 per share. Apart from raising the $200 million FCCBs, the company also said it mopped up Rs 1,880 crore ($400 million) through QIPs to fund future projects in the infrastructure and power sector.
L&T hopes to ramp up overall revenues from Rs 34,000 crore to Rs 38,000 crore by this year-end. L&T’s consolidated debt stood at Rs 18,400 crore ($3.6 billion) as on March 2009. “While this is a step in the right direction, the equity and FCCB issues will only 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,” Moody’s had said in a statement on Thursday.
Although the equity and FCCB issuance would partly-fund the company’s expansion, Moody’s expects the group’s consolidated debt to increase over the medium term as it enters into new ventures.
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