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Kohinoor Foods Ltd in Delhi, is going to issue preferential shares upto 20 percent. Each share will sell at a premium of Rs 160. They are also getting a confirmed business of 25000 tonne of rice from the Dubai Joint Venture.
Shares of Kohinoor Foods (KFL) were locked at 20 percent upper circuit on Monday, after the company announced its plans issue equity shares on preferential basis to Abu Dhabi-based agri company Al Dahra International Investment (ADII) LLC at a consideration of Rs 160 apiece.
Speaking to CNBC-TV18, Satnam Arora, MD of the company says huge price premium reflects the bullish prospects of the basmati rice and ready-to- eat foodstuff producers. “We got a commitment from them also to supply minimum 25,000-30,000 tonne of rice,” he informs.
The total amount raised via the exercise will be around Rs 115-120 crore. "This will be used as an additional working capital in the company," Arora says.
Below is the edited transcipt of his interview with CNBC-TV18:
Q: Could you confirm whether you are indeed looking to sell 20 percent stake in your Dubai joint venture (JV) and what kind of money you hope to raise from that?
A: I want to give you a clarification that we are not going to sell 20 percent stake in our Dubai venture but we are going to issue preferential shares from Kohinoor Foods Ltd in Delhi. So Dubai definitely is at a second stage but first stage is that company is joining us in Delhi. They have been looking for a partner in India to buy regular rights. So we have finalized on them. They will buy 20 percent of additional shares in India. We have already informed the stock exchange about it after the board meeting. We have asked for the approval from the shareholders.
Q: At what price will this company buy 20 percent in Kohinoor Foods relative to the market price of Rs 45?
A: No, it is at Rs 160 per share from Kohinoor Foods. The good thing is we are getting a confirmed business of minimum 25,000 tonne of rice from them for Dubai. It is a very well established company in Abu Dhabi and they have connections in the Middle East. So we will get additional business from government agencies from the Middle East through them.
Q: I am getting a bit confused here. The 20 percent stake is happening in Kohinoor Foods, the listed company or your Middle Eastern company?
A: No, it is 100 percent in Kohinoor Foods in listed company in India.
Q: At Rs 160 per share?
A: Yes, it is Rs 160 per share.
Q: How come the preferential is happening at such a huge premium?
A: They like the company; they like the prospects and they know that we specialize in the product. They are joining hands and we got a commitment from them also to supply minimum 25,000-30,000 tonne of rice.
Q: This money comes into the books of the company or does it go to the promoters of Kohinoor Foods, who gets the money from this preferential issue?
A: We will get the working capital in Kohinooor Foods Ltd from them. Nothing will go to the promoters.
Q: What is the quantum of money?
A: It will be about Rs 115-120 crore. This will be used as an additional working capital in the company.
Kohinoor Foods stock price
On April 17, 2014, Kohinoor Foods closed at Rs 45.10, down Rs 0.25, or 0.55 percent. The 52-week high of the share was Rs 57.60 and the 52-week low was Rs 27.45.
The company's trailing 12-month (TTM) EPS was at Rs 3.83 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 11.78. The latest book value of the company is Rs 105.80 per share. At current value, the price-to-book value of the company is 0.43.
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