Kesoram Industries to raise Rs 500-600cr in equity to reduce high-cost debt

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The rights issue is expected to be completed by September-October

Kolkata: BK Birla Groups Kesoram  Industries is planning to raise ` 500-600 crore by way of equity as a precursor to the roadmap of eliminating its entire ` 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 said that the company board will meet on May 14 to clear decks for infusing equity capital.

“Rising funds up to ` 600 crore by way of equity will take place in tranches. In the first tranche, a rights issue worth around ` 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 ` 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 ` 200 crore per annum if the proposed ` 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 ` 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 ` 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.