Automotive component manufacturer Motherson Sumi Systems (MSSL) has decided to raise up to Rs 3,000 crore through issuance of non-convertible debentures (NCDs) on private placement basis. In an exchange filing on Tuesday, the Motherson Group company said that its board has approved issuance of rated, unsecured, listed, redeemable NCDs in the range of Rs 1,500 - Rs 3,000 crore. Recently, many companies, including Reliance Industries and Tata Steel, have raised funds via debt to meet liquidity needs in the wake of economic disruption caused by COVID-19 pandemic.
"The Committee of Directors (Fund Raising) of the Board of Directors of the company in its meeting held today September 8, 2020, has approved the issuance of Rated, Un-Secured, Listed, Redeemable Non-Convertible Debentures (NCDs), with an aggregate amount up to Rs 1,500 crore which may be increased up to Rs 3,000 crore," Motherson Sumi Systems said in a filing to the Bombay Stock Exchange.
The funds will be raised on private placement basis in one or more tranches, it said, adding that bonds will be listed on the BSE.
The tenure of the NCDs is three years from the date of allotment with a fixed coupon rate. Rating agency India Ratings and Research (Ind-Ra) has assigned 'AAA/Negative' status to the debt instruments.
"The negative outlook reflects a slower production ramp-up in the global auto volumes, coupled with lower operating leverage and deterioration in the credit profile of end-consumers, which could result in MSSL's leverage remaining higher than Ind-Ra's expectations. Additionally, continued losses at the company's greenfield plants in Alabama and Hungary could be a drag on the performance, resulting in a higher leverage than the rating triggers," the agency has said in its report.
Motherson Sumi Systems' consolidated revenue declined to Rs 8,500 crore in the first quarter of the current fiscal compared to Rs 16,790 crore in Q1 FY20, mainly on account of shutdown of plants globally for about a month due to the COVID-19 pandemic. The Noida-based auto component manufacturer reported consolidated net loss of Rs 1,191.65 crore as against a net profit Rs 360.64 crore in the corresponding period of last year.
Going forward, Ind-Ra expects the FY21 consolidated revenue to decline 15-20 per cent YoY organically and expects the sales volume and revenue to recover from FY22.
Earlier in April, Motherson Sumi Systems had said it will raise up to Rs 1,000 crore to ensure sufficient liquidity in the system to combat coronavirus pandemic-led crisis.
Shares of Motherson Sumi Systems settled Tuesday's trade at Rs 111.90 apiece on BSE, down 1.80 per cent from the previous close.
By Chitranjan Kumar