Kumar Mangalam Birla and other promoters will invest around Rs 500-575 crore this year into Aditya Birla Nuvo.
Kumar Mangalam Birla and other promoters will invest around Rs 500-575 crore this year into Aditya Birla Nuvo, which will be used to reduce the company’s debt, according to a company official.
The company’s board of directors had on Monday decided to issue 1.85 crore warrants, convertible to an equal number of shares, to the promoters, the Aditya Birla family.
“If the shareholders approve of the deal on June 17, promoters will invest Rs 250 crore immediately as the upfront deposit for the issue of the warrants. After that, they will invest Rs 300-325 crore during the remaining part of the year by converting some of the 1.85 crore warrants,” said Sushil Agarwal, CFO, Aditya Birla Nuvo.
The CFO pointed out that ‘creeping acquisition’ regulations will prevent the promoters from converting the entire 1.85 crore warrants into equity this year.
The promoters currently hold around 41% of the company’s equity, which will be raised to around 46% by March 2010 and 51% during the next financial year. The warrants will dilute the company’s equity base by around 19.5% and can be converted at Rs 540 per share. The stock closed at Rs 550 on Friday and Rs 716 on Tuesday on the National Stock Exchange.
Agarwal said the company will use the new funds mainly to retire its substantial debts of around Rs 4,500 crore, which cost the company nearly Rs 500 crore in interest last fiscal. The company had reported a full-year loss of around Rs 430 crore for FY09.
“We have a capex requirement of around Rs 1,000 crore this year and over Rs 2,000 crore over the next two to three years, depending on how the overall economy gears up... Since we have enough funds for the current year, the new funds will mainly go into retiring short term debts,” he said.
AB Nuvo’s capex plan is more or less evenly distributed between its life insurance business — Birla Sun Life — and its remaining businesses, such as the manufacturing of carbon black, textiles and electrical insulators.
The company said the current round of promoter funding will not be enough to meet its target of substantially reducing its debt levels from the current 1:11 and the company is exploring more options to convert debt into equity.
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