BK Birla Groups Kesoram Industries is planning to raise Rs 500-600 crore by way of equity as a precursor to the roadmap of eliminating its entire Rs 1,900 crore high-cost debt over the next 24 months.
BK Birla Groups Kesoram Industries is planning to raise Rs 500-600 crore by way of equity as a precursor to the roadmap of eliminating its entire Rs 1,900 crore high-cost debt over the next 24 months. The owner of the Birla Cement brand had taken the high-cost debt, via Non-convertible debentures and Optionally convertible debentures at an interest cost of 19.5 per cent from a clutch of private investors, to settle bank debts.
Sources told PTI that the company board will meet on May 14 to clear decks for infusing equity capital. “Rising funds up to Rs 600 crore by way of equity will take place in tranches. In the first tranche, a rights issue worth around Rs 200 crore is likely to be floated,” the sources said. For the balance amount, the company will explore other instruments, including private placement, Global Deposit Receipts to name a few, the sources said.
The rights issue is expected to be completed by September-October. The equity infusion will help the cement maker to reduce debt to EBITA ratio to 3:1 from 4:1 and improve its ratings. In absolute terms, the company aims to keep the debt level at not more than Rs 1,500 crore.
“When the debt is reduced to three times to EBITA, the company will have several options to raise low-cost debt from various sources. The company will be able to save about Rs 200 crore per annum if the proposed Rs 1,500 crore debt is replaced with low-cost funds to aid its turnaround strategy,” an analyst tracking the company said. In March, the whole-time director and CEO of Kesoram Industries, P Radhakrishnan had said, “We are having an EBITA of Rs 370-400 crore with sales of 5-5.5 million tonne of cement a year. The quarterly interest outgo on the debt would be around Rs 240 crore. So there is no question of default.”
Radhakrishnan had also mentioned that the Kolkata-based company is focusing on its operation and targeting a 30 per cent growth in cement sales to take the volume to around 7 million tonnes.