HSIL’s qualified institutional placement (QIP) ended on Thursday at Rs 400 per share at a discount to the floor price of Rs 412.53 per share. The share had closed at Rs. 441.75 on the previous day. Speaking to CNBC-TV18, President RB Kabra said the company had an overwhelming response to the QIP and was successful in raising Rs 250 crore. Institutions like HDFC and Kotak MF were among some key institutions to have given thumbs up to the QIP.
India’s largest listed sanitaryware company will be using the entire QIP amount to pare debt which currently stands at around Rs 1,000 crore. The interest cost of the company will be reduced by Rs 22.5 crore to Rs 50 crore post debt repayment.
Below is verbatim transcript of the interview:
Q: You have done it at a slight discount to yesterday’s price. Can you take us through the details?
A: We have raised Rs 250 crore at Rs 400 price for Rs 2 shares and so, there is a premium of Rs 398 and the floor price as per Securities and exchange board of India (Sebi) formula was around Rs 412.
Approximately, 3 percent discount has been given on the floor price because the issue was closed yesterday and the share price shot up after that and therefore, that is not a huge discount.
Discount is only 3 percent and normally it goes 5 percent but we could manage at 3 percent discount and that was possible because we had very overwhelming response for the issue.
Q: What kind of people responded? Was it domestic institutions, foreign institutions?
A: Yes. Both institutions were there and all good names from India like HDFC, Kotak Mutual Fund, Faering Capital, Sundaram, Reliance were there. Among foreign institutional investors (FII) we had Prince Street, Kotak Offshore and few other good names.
Q: How will you use the Rs 250 crore that you have raised? How much of it will be used to pare your debt and how much for capital expenditure (capex)?
A: Everything will be used for repayment of debt as was mentioned in one of our resolutions passed by the board and shareholders because the capex plan that we have is already funded and the company has enough cash generation. Therefore, we don’t require these funds currently for the expansions.
Q: By how much has your equity increased and by how much will your debt fall? What is the current debt equity and what will it be after you pare down the debt and increase your equity?
A: We have raised Rs 250 crore at Rs 400. So we have issued 52.5 lakh shares and the equity will be diluted by around 9 percent and the current debt levels were around Rs 1,000 crore. Now they will go down to Rs 750 crore.
Q: By how much will your interest costs go down annually?
A: The average interest cost currently is around 9 percent and therefore, around Rs 22.5 crore per annum interest cost will go down.
Q: You were doing about Rs 75 crore a year in terms of interest cost.
A: So, now that should come down to around Rs 50 crore.
Q: What is the sales trajectory? You said your capex plans are completed, so what should we expect in terms of sales?
A: Not really completed. We had completed a large capex of Rs 120 crore on our faucet plant which went into production only in July last year and this year we are expanding both the sanitaryware plants.
We are adding around 4 lakh piece capacity and capex will be around Rs 50 crore over a period of next 12 months and then we would be working on a Greenfield plant in Gujarat at a cost of around Rs 150 crore.
The work will start sometime next year and it will take two years once we start. So what I mentioned was that the company has enough cash generation to fund all these capex through internal generation. Therefore, we won’t be requiring additional funds for borrowing or for raising capital.
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