The Raju family, promoters of the Hyderabad-based Nagarjuna Group of companies, plans to dilute 4-5% of its stake in group subsidiary, Nagarjuna Agrichem Ltd, to raise Rs 100 crore this fiscal. A qualified institutional placement or placement of equity with a private equity player would be the preferred route.
The transaction would value the Hyderabad-based company at approximately Rs 2,000 crore.
?The promoters of the company plan to dilute 4-5% of their stake from the present 78.29%. The promoters have to pare their stake to below 75% as per the Sebi regulations. They are planning either a qualified institutional placement (QIP) or a strategic investment by a private equity (PE) player to divest their excess stake in Nagarjuna Agrichem,? a senior company official told analysts recently.
The move comes in the wake of the government’s plan to enhance the public float in listed companies by putting a cap on the promoters holding at 75%. According to the norms, if the promoters’ stake exceeds the threshold limit, they have to either offload the excess stake to remain listed or make a mandatory open offer for an additional 20% stake to the public shareholders so as to delist the company from stock exchanges.
As on March 31, 2010, promoter holding in Nagarjuna Agrichem stood at 78.29%, way above the Sebi stipulated 75% mark. According to a recent study by merchant banker SMC Capital there were 180-odd companies in which the promoters held over the stipulated 75% stake. The companies in which the promoters holding exceeded the 75% mark include software bellwether Wipro Technologies Ltd (80.86%), Gillette India Ltd (88.73), and the public sector Engineers India Ltd (90.40%).
The Raju family had reportedly opened talks with a clutch of PE firms to rope in one or more players as strategic investors, a source close to the development added. However, he refused to name the PE players saying it is too premature to name them citing confidentiality clause.
The management has firmed up plans to shell out Rs 350 crore towards capital expenditure during the near future. Nearly Rs 100 crore is expected to be raised through the stake sale, it plans to raise Rs 200 crore in debt and the remaining Rs 50 crore would be financed through internal accruals.
The company would shell out Rs 75 crore to expand its existing capacity by de-bottlenecking its two manufacturing units in Andhra Pradesh, it plans to set up a 8,000-mmtpa green field manufacturing facility at the Visakapatanam SEZ.