Bhushan Steel plans Rs 500-700cr rights issue

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Bhushan Steel plans Rs 500-700cr rights issue

In an interview to CNBC-TV18, Nitin Johri, chief financial officer of Bhushan Steel says, the company plans to raise Rs 500-700 crore via rights issue. “We are almost ready to file with the SEBI for approval. Once we get the approval from SEBI, rights issue will be opened. Hopefully, sometime by the end of the March,” he adds.

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In an interview to CNBC-TV18, Nitin Johri, chief financial officer of Bhushan Steel says, the company plans to raise Rs 500-700 crore via rights issue. "We are almost ready to file with the SEBI for approval. Once we get the approval from SEBI, rights issue will be opened. Hopefully, sometime by the end of the March," he adds.

The proceeds from the rights issue, he says, will also be used to reduce the debt.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Ekta Batra. Also watch the accompanying video.

Q: When will the rights issue start up? When you expect to get the money and what will you do with it?

A: We are almost ready to file with the SEBI for approval. Once we get the approval from SEBI, rights issue will be opened. Hopefully, sometime by the end of the March, depending upon the approval from the SEBI how long they will take to approve the rights issue.

The money will be utilised basically to reduce the debt. We will be paying some debt out of the proceeds from the rights issue. It's a small issue of Rs 500-700 crore. We are yet to decide the size.

Q: What is your target by reducing your debt/equity? At the moment, your debt I understand stands at Rs 18,600 crore and the debt/equity is at 2.2 times, is that right?

A: Yes, that is right.

Q: So, what do you want it to scale down to?

A: We will try to reduce below two. The new facility is going to start in October 2012. With more production and increase in EBITDA as well as net profit, the debt equity will reduce within two years below two. The proceeds from the rights issue will also be used to reduce the debt.

Q: What sort of gross debt levels would the company be comfortable with? Once your plant gets commissioned in October 2012, give us a sense on possibly six months from there, one year from there, what will be the gross debt levels that Bhushan Steel will be working with?

A: I think gross debt would be in the range of anything between Rs 16,000 to 20,000 crore. It is very difficult to give you the exact number. It depends upon the progress in the other projects because this is not the only project which we are setting up. The major one will get completed by September-October 2012.
There are other projects like mining and other things that will take little longer. We feel it will be in the range of Rs 16,000 to 18,000 crore depending on the right issue, profitability and QIP and all.

Q: Can you give us more details about the possible equity raising besides the rights issue? What targets do you have with regards to a QIP? How much would you be looking to raise and by when?

A: We have not yet decided. But the resolution has been passed last year with the objective of raising around anything between USD 500 billion to USD 1 billion. But nothing has been finalised so far. Definitely, we want to inject some equity in the company so that there are no issues regarding the debt equity ratio and all.

Q: How would you expect your interest payments to pan out in the four quarters of FY13, you have some more production coming in September?

A: Yes, the trial production from the new facility will start this year.

Q: How the interest will move?

A: This year, the interest cost would be in the range of Rs 800 to 900 crore for the financial year 2012. I think 2013 will be approximately Rs 1,000 crore and 2014 will be the full year when all the interest will be diverted to P/L, which should be in the range of around Rs 1,500 crore.