Hindustan Construction Company (HCC) has announced Rs 3,364 crore reduction in the corporate guarantee to Prolific Resolution Private (PRPL), an associate company, the company said in a regulatory filing on Thursday. This reduction is expected to create long-term value for shareholders, HCC said in an exchange filing.
In September 2022, HCC had provided a corporate guarantee for 100% of PRPL’s debt. Currently, the total amount including accrued interest for PRPL’s debts is nearly Rs 3,935 crore, along with awards and claims worth Rs 6,325 crore.
As per the company’s statement, HCC sought approval from PRPL lenders and other relevant stakeholders, following which HCC’s guarantee obligations have been reduced from 100% of the outstanding amount to nearly Rs 571 crore, which represents the principal amount transferred.
HCC further added, “The reduction is part of the company’s ongoing commitment to de-leverage its balance sheet, strengthen its investment-grade rating, and access capital markets for stronger future growth as it scales its operations.”
“This material event has paved the way for HCC to access larger credit facilities and raise equity capital, including the recently announced Rights Issue which is supported by HCC’s Promoter Group. The revised guarantee framework has been executed today in coordination with lending institutions and is in compliance with applicable regulatory, legal, and governance requirements.”
HCC approves rights issue
On December 1, HCC board had approved a rights issue worth Rs 1,000 crore. The issue involves the issuance of nearly 80 crore new shares at Rs 12.5 per share, including a premium of Rs 11.50.
The existing shareholders of HCC will receive 277 rights shares for every 630 shares they hold as of the record date. The rights issue is likely to increase the company’s equity base to 261 crore shares from 181 crore shares.
The issue will open on December 12 and close on December 22. The on-market renunciation for the existing shareholders will take place on December 17, while the deadline for off-market renunciation is set at December 19.
HCC share performance
Following HCC’s announcement the company’s share price rose by nearly 4% in the intraday session. Over the past one month the company’s stock has declined by nearly 12%