Will raise $100m via FCCB; cheer restart of mining: Guj NRE

Arun Kumar Jagatramka, MD, Gujarat NRE Coke expects the demand for coke to pick up after the removal of the  ban on iron-ore mining in Karnataka. Speaking to CNBC-TV18, he adds that the company plans to raise upto USD 100 million via FCCBs to fund increase in capacity in India and meet capex requirements

Below is the edited transcript of the interview on CNBC-TV18

Q: What are your plans to raise capital?

A: We are going in for an enabling resolution from shareholders to raise this FCCB fund when the time is appropriate. With the lift on the ban on mining announced two years, we hope demand to pick up and allow us to restart our capex programmes accordingly.

Q: Is your limit for funds to be raised set at Rs 550 crore?

A: No, we have decided to raise up to USD 100 million. Initially we might raise USD 40-50 million because it is not prudent to increasing dilution at when share prices are lower.

Q: To what purpose will the funds be used?

A: The funds will be used to raise capacity in India and meet capex requirements.

Q: Is this fund-raising exercise related in any manner to the attempt by Jindal Steel and Power Ltd (JSPL) to acquire your Australian subsidiary of which you own about 65 percent and JSPL owns 31 percent?

A: No, this has no relation to that. The open offer by JSPL closed in March and that company is considerably funded. Moreover, the FCCB is to further our capex and expansion plans in India because after the last four years of downturn, we think the next two years should usher in a profitable cycle for the industry.

Q: Do have plans to buy back more shares in your Australian subsidiary to ward off any threats from rivals?

A: With a 64-percent stake, I do see any threat and with 4 percent of the shares held by the public, there is not much scope for us to acquire any more stake.

Q: Will you be using the funds raised via FCCBs to lower the levels of the high-cost debt in your books?

A: We do not have any high-cost debt.

Q: What is your total debt?

A: Our total debt is around Rs 1,400 crore.

Q: What kind of a debt-equity ratio would that account for?

A: As against our networth of over Rs 1,600 crore, the debt-equity ratio is below 1.

Q: Almost 84 percent of your promoter shareholding consists of pledged shares and of late, the market is very concerned about companies where 70-80 percent of the shareholding is pledged. Is this on of your priority concerns?

A: The pledged shares are not related to the market price. They are held by the banks and other term-lenders. It is related to the main borrowings of the company secured by company’s assets with the promoter's shareholding as collateral. This has no bearing on the rise or fall of the company’s share-price. The percentage of pledge should not be a worry from that perspective at all.

Q: Against the backdrop of the huge fall across several commodities, how are coking coal prices faring?

A: Coking coal is one product that has no direct relation to the commodities sector. In fact, the pricing for April-June quarter is around USD 7 higher than the January-March quarter.

Q: Do you expect coking coal prices to fall in response to fragile global economic cycles?

A: No. There is an upward pressure on coking coal and coke as demand has started to pick up after the removal of ban on iron-ore mining in Karnataka which also considerably affected steel production. With the removal of the ban on iron-ore mining, I expect steel production to increase and lead to higher demand for coke and coking coal.