The fund raising is a two part step involving preferential allotment and detachable warrant issue. The subscription time for the warrant is 12-months from the date of issue of the right shares.
Nitin Patel, ED of Sadbhav Engineering said the company will raise funds through a combination of rights and preferential issues.
“The price of the rights issue based on the average of 60 days is coming to Rs 103. So all put together Rs 200 crore is being raised in the company,” he told CNBC-TV18.
Below is the edited transcipt of his interview with CNBC-TV18:
Q: We still have only sketchy details about your money raising plan, can you tell us how much you are raising, what is the warrant priced at and what will it be finally converted?
A: Raising is in two parts, first is preferential offer to the promoter and 18 lakh shares have been offered to the promoter at average price of 26 weeks that is at Rs 115.75 per share and the balance 108 lakh shares are being offered in the form of rights issue to all the share holders including promoters.
The price of the rights issue based on the average of 60 days is coming to Rs 103. So the board has decided to offer it at Rs 103 per share. So all put together Rs 200 crore is being raised in the company.
Q: What is the rights ratio?
A: The rights ratio is for every 30 shares we will have one share and one detachable warrant to be converted into equity share at a later date as per the decision of the board.
Q: How do you expect people to subscribe to rights issue at Rs 103 per share when the current market price is Rs 87 per share? Normally rights issues are supposed to come at a discount to market price?
A: Ultimately the average price which has come as per the guideline has come at Rs 103. So based on the discussions amongst the board, it has decided that it will be issued at Rs 100 per share.
This discount in the stock price has come in the last four-five days, before that the stock was above Rs 100.
Q: My point is how would you expect someone to subscribe to the rights issue, how do you plan to raise the money when there is no one who is going to subscribe for this rights issue when you have a stock which is available in the stock market at a 20-25 percent discount and what is the warrant sweetener also along with the rights issue?
A: It will be the detachable warrant. The price of the warrant is also the same. But the subscription time for the warrant is 12-months from the date of issue of the right shares. Therefore, the company is confident that the issue will be subscribed. Accordingly the decision has been taken by the board today.
Q: How much will your equity be diluted by this share issue?
A: In terms of dilution, it is around 10-12 percent but in terms of the preferential offer and the right considering that the promoter which is currently 47.3 percent will go around 51.6 percent post this warrant and the rights issue.
Q: If indeed there is no subscription to the rights issues or if it is undersubscribed, will promoters pitch in and take the balance rights issue?
A: The option is obviously available. So at that time promoter has to take a call. If they are willing to take it, they may go and subscribe that portion also. That option is obviously available to them.
Q: What is the money going to be used for?
A: There are three-four purposes. Considering the current order book, which is above Rs 10,000 crore as compared to the turnover of Rs 1,800 crore of the FY13, it is expected that some capital investment is likely to be done in the company for over a couple of years of Rs 130 crore.
Apart from that, for general corporate purpose also the money will be required basically to cater to the topline target of and to execute all the orders of more than Rs 10,000 crore over the period of three years from now. So all put together, we intend to strengthen the company and also there are most likely chances that the new orders may come considering the current leg in the market. It is decided by the anagement that company should be ready to cater the growth, which is likely to come.
Sadbhav Engg stock price
On September 19, 2014, Sadbhav Engineering closed at Rs 238.45, down Rs 4, or 1.65 percent. The 52-week high of the share was Rs 252.10 and the 52-week low was Rs 58.50.
The company's trailing 12-month (TTM) EPS was at Rs 7.71 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 30.93. The latest book value of the company is Rs 61.51 per share. At current value, the price-to-book value of the company is 3.88.
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