IiAS flags Rs 200-cr debt raising plan by Inox Wind

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Updated: October 27, 2021 12:49 PM

The proxy advisory firm cited high equity dilution at current stock price, and increase in leverage in case of debt raise as the reason for flagging against the fundraise.

Inox WindThe Inox board on October 6 approved an enabling resolution to raise the fund on private placement basis, preferential placement or through qualified institutional placements (QIPs).

Proxy advisory firm Institutional Investor Advisory Services(IiAS) has flagged Inox Wind’s plan to raise Rs 200 crore via debt or equity to meet its long-term fund requirements for capital expenditure and working capital needs to expand renewable projects. The proxy advisory firm cited high equity dilution at current stock price, and increase in leverage in case of debt raise as the reason for flagging against the fundraise.

The Inox board on October 6 approved an enabling resolution to raise the fund on private placement basis, preferential placement or through qualified institutional placements (QIPs). An extraordinary general meeting (EGM) has been called on October 29 to seek shareholders’ approval for the fundraise as well as other resolutions on related party transactions and increasing the authorised capital of the company.

Iias has a negative view on the fundraising plan of Rs 200 crore, while it has nodded positively for all other resolutions. The proxy advisory firm has reasoned, “if we assume Inox to raise funds by issuing fresh equity or convertible securities at the current market price of Rs 127.5 a piece, there will be a dilution of around 6.6% on the expanded capital base”. “However, if funds are raised via debt, the company’s financial leverage will weaken further from a debt to equity ratio of 1.2 times on a consolidated basis as on March 31, 2021,” the proxy advisory firm said.

Crisil’s ‘BBB/Stable/CRISIL A3+’ rating on the company indicates moderate degree of safety regarding timely servicing of financial obligations. “We expect companies to seek approval for debt and equity issuances separately, given the distinct nature of the instruments and the impact on credit profile in the case of debt,” the advisory firm noted.

At the end of September 2021, Inox Wind had a gross debt of Rs 1,700 crore, up from Rs 1,020 crore a year ago. It has a cash reserve of Rs 136 crore, hence net debt stood at around Rs 1,560 crore.

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