Aditya Birla Nuvo, a part of $28-billion conglomerate Aditya Birla Group, on Wednesday said the company would be raising Rs 1,000 crore via preferential allotment of warrants for reducing debt by repayment of short-term borrowings.
According to experts, the company’s high debt to equity ratio remains an area of concern. Nuvo currently has cash reserves of about Rs 750 crore on its books and debts of Rs 4,200 crore.
The company will raise Rs 1,000 crore over a period of 18 months by issuing 1.85 crore warrants of Rs 10 each in one or more tranches to the promoters on a preferential allotment basis.
The company, in its statement to the Bombay Stock Exchange (BSE), said the shareholders at the extraordinary general meeting (EGM) of the company held on Wednesday had approved the issue of warrants.
Sushil Agarwal, CFO of Aditya Birla Nuvo, told FE, “Though Aditya Birla Nuvo has short-term surplus, it needs long-term funding to reduce debt on its balance sheet. This exercise will strengthen our balance sheet to support and grow high growth businesses, which together account for 72% of its consolidated revenues.”
Aditya Birla Nuvo Ltd shares on Wednesday slipped 5.33% or Rs 50.60 to close at Rs 898.75 on the BSE.
Agarwal had earlier in an interview told FE, “Considering the business mix we have, I don’t think that our current debt equity ratio of 1:1.1 is very abnormal, so long as you invest in high growth business and increase your market share by capturing the growth momentum in the initial years.”
The company has lined up a capex of about Rs 1,000 crore in FY 2010 of which about Rs 500-600 crore will be invested in growing its insurance business. Nuvo’s net loss widened to Rs 141.15 crore in the fourth quarter ended March 31, 2009. The company had reported a net loss of Rs 21.84 crore in the corresponding quarter last year. Net sales during the quarter stood at Rs 4,096.91 crore, up 11%, as against Rs 3,683.34 crore in Q4 FY08.