Ajit Gulabchand-led Hindustan Construction Company’s (HCC) share price surged 2.6% in intra-day trade on Friday on the Bombay Stock Exchange and closed 1.67% up at Rs 14.57, after the company informed stock exchanges that it has filed a draft letter of offer for its first ever rights issue of up to Rs 500 crore, with the Securities and Exchange Board of India (Sebi). The rights issue comes close on the heels of the loss-making civil engineering and construction company’s subsidiary, Lavasa Corporation admitted for insolvency proceedings by the Mumbai-bench of National Company Law Tribunal (NCLT). Lavasa is jointly held by HCC (68.7%), Avantha Group (17.18%), Venkateshwara Hatcheries (7.81%) and Vithal Maniar (6.29%).
On August 30, NCLT admitted a plea filed by operational creditors who initiated corporate insolvency resolution process (CIRP) against Lavasa under the Insolvency and Bankruptcy Code 2016 (IBC). NCLT has appointed Devendra Prasad as interim resolution professional under the provisions of the IBC, according to a stock exchange filing.
The company’s board of directors, last week, had approved the issue of equity shares of the company by way of a rights issue for an overall amount not exceeding Rs 500 crore to the existing shareholders. The company has not disclosed the utilisation of the proceeds of the rights issue.
Between January and August 2018, nine companies have raised nearly Rs 17,857 crore through rights issuances, data sourced from Prime Database shows. Tata Steel raised Rs 12,703 crore in February, which is the highest amount raised by a company through rights issuance during this period. Indiabulls Ventures’ Rs 2,000 crore and Piramal Enterprises about Rs 1,978 crore, also raised in February, are the other big rights issuances in this year.
After posting profits for the last 20 quarters, HCC on a standalone basis plunged into loss and reported a higher than expected net loss of nearly Rs 20 crore for the three months of April-June 2018. This was owing to lower claims recognition. Analysts at Edelweiss Securities had noted in their first quarter results update that slower-than-anticipated receipt of claims along with concerns pertaining to Lavasa have dragged HCC’s stock price. “We believe receipt of arbitration claims money, traction in revenue growth, monetisation of BOT assets (for which management is in talks with investors) and progress in Lavasa’s debt resolution will determine the stock’s performance going ahead,” they said.
On a consolidated basis, the company reported a wider net loss of Rs 1,090 crore for the full year ended March 31, 2018 versus a net loss of Rs 983 crore in the previous year. The company’s total debt as on March 31, 2018 stood at Rs 4,785 crore lower than Rs 6,873 crore in the previous year, Bloomberg data shows.