Sintex Industries plans to raise $160-180 million via a mix of fresh foreign debt instruments and equity issue along with warrants issue to the promoters, three sources close to the development told NDTV. The fund raising exercise is to primarily meet repayment obligation of about $293 million existing FCCBs by end of March 2013.
The company plans to issue $100 million fresh FCCBs and has appointed merchant bankers for the said issuance. Religare is learnt to be one of them, the sources added. The company also plans to raise $40 million equity funds through QIP route, which will enable it to lower the high debt-to-equity ratio on its balance sheet. “If market conditions are favourable, one can expect this fund raising exercise to be completed by the end of this month itself,” said one of the sources, who did not want to be identified.
The board of directors met on October 11 to consider the issue of three crore warrants to promoters on preferential basis, which is expected to fetch around $40 million upon conversion. The company has decided to convene an EGM of shareholders on November 9 to seek approval for the same.
After three consecutive quarters of falling revenue growth, Sintex Industries reported a 3 per cent rise in its revenues for the second quarter this fiscal, on a year on year basis. But analysts say the focus will continue to remain on the balance sheet and funding concerns. Brokerage house CLSA downgraded the stock from ‘underperform’ to ‘sell’ citing unfavourable risk-reward given funding overhang. “While the company has started the process to issue 30 million warrants to the promoters, this will only cover $40 million of the requirement assuming full conversion. Visibility on the balance fund raising is low and remains a significant overhang. In case Sintex has to resort to domestic debt for the balance amount it would imply much higher capital costs and risks to earnings estimates”
However, analysts from PUG Securities, post the earnings, said: “Other than the FCCB, the company has no other repayment obligations over the next 3-4 years. Sintex bonds has rating of AA+ and hence has the ability to borrow up to Rs 90 billion and hence there is no concern on the meeting its FCCB conversion obligations. We expect sentiments to improve as the company finalizes the exact funding options.”