Hindustan Copper may not sell shares in FPO
State-run Hindustan Copper may not sell new shares in a planned follow-on public offer as soaring copper prices have left the company with strong cash reserves and no immediate need to raise funds.
June 08, 2011 / 12:33 IST
State-run Hindustan Copper may not sell new shares in a planned follow-on public offer as soaring copper prices have left the company with strong cash reserves and no immediate need to raise funds.
That could leave the government to sell 10% of its stake in India's third-largest copper producer, a top official said, which could raise USD 500 million at current valuations.The stake is widely expected to be priced at a steep discount to the market price.The long-delayed share sale had originally envisaged the company issuing an equal amount of fresh equity to sell alongside the government's shares.The government owns 99.6% of Hindustan Copper."It is an option that has been discussed, yes, but no final call has been taken," Chairman and Managing Director Shakeel Ahmed told Reuters in an interview, when asked if the share sale could only involve government divestment."Some discussions (with the Department of Disinvestment) have taken place but there is no finality."The offer is part of the Indian government's plan to raise USD 8.9 billion through share sales in public sector firms this financial year to cut high fiscal deficit and garner funds for schemes for the poor.India approved Hindustan Copper's follow-on offer last year, but it has been pushed back while the company appoints independent directors, which could delay it by at least another three months, Ahmed said.This delay has given the company an opportunity to reconsider its funding options, he said, adding that sharply higher copper prices have left the company with strong cash reserves and no immediate fund raising needs.Copper prices have risen nearly a quarter so far in 2011."There is no pressing need for the FPO immediately," Ahmed said. "We'll be requiring some funds in 2013/14."For this, the company is considering a joint venture with state-run aluminium producer National Aluminium Co for investment in mining projects and external commercial borrowings to meet funding requirements.Hindustan Copper currently holds cash reserves of Rs 4.5 billion and has no long-term borrowings.The copper major
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