Debt concerns drive India Inc to rights issue

Amidst capital constraints, a slew of Indian companies are planning rights issues of shares for working capital, expansions and debt servicing. Tata Motors, GMR Infrastructure, State Bank of India (SBI), Zee Media Corporation, Vascon Engineers and State Bank of Travancore (SBT) have lined up their issues back-to-back and plan to mop up around Rs 15,000 crore in the next couple of months. They would be offering shares to the existing investors in line with their holding at a pre-determined price and ratio.

At first, GMR Infrastructure's rights issue will open on March 24 and close on April 8. The issue seeks to mobilise over Rs 1,400 crore consisting of 93.45 crore fully paid up equity shares of face value of Re 1 each. Three equity shares are being offered to its shareholders for every 14 equity shares they held on March 12. The management committee of the board has approved and adopted the letter of offer and issue schedule, for the issue of equity shares on a rights basis to the existing shareholders, the company said in the statement.

The largest among the lot would be Tata Motors. Last week, the carmaker's shareholders approved a proposal to raise Rs 7,500 crore via a rights issue. The proceeds of the issue will be used to fund various activities, including introduction of more than 100 new commercial vehicle variants over the next three years and passenger vehicles on new modular platform from FY17. It also intends to use the funds to expand in international markets. Besides, it looks to develop a product portfolio in the passenger vehicles segment until 2020, with the launch of two or three new products each year.

Tata Motors also plans to introduce eight improved and enhanced vehicles across five key brands over the next two or three years and the products will be offered on a new modular platform from FY 2016-17. The company is also looking to add more than 40 new products over the next five years in the Jaguar Land Rover (JLR) business. The company has a consolidated debt of Rs 72,828 crore at the end of the third quarter, while the Indian unit has Rs 21,593 crore debt on its books.

According to company executives, the debt positions of the Indian manufacturing majors are higher at the current level. "They cannot go for further leveraging the balance sheet for growth," says an executive with GMR Infrastructure. "In such a scenario, its ideal raising fund through equity route."

Banking giant SBI plans its biggest share sale issue to raise Rs 10,000-15,000 crore. It has all the approvals in place. The fund would be raised either through follow-on public issue, qualified institutional placement (QIP), rights issue, private placement, global depository receipts, American depository receipts or a combination of these. The bank raised Rs 8,032 crore in the previous fiscal by selling shares through the QIP route.

The capital market regulator SEBI has approved the Rs 200 crore rights issue of Zee Media Corporation. It filed the application for the proposed rights issue in January through its lead merchant banker Axis Capital. The funds raised from the issue would be used for purchase of equipment and accessories for production and broadcasting, repayment of certain loans availed by the company, funding subsidiaries for repayment of loans, and other general corporate purposes.

State Bank of Travancore (SBT) plans to raise Rs 474 crore via a rights issue. For every five equity shares, the shareholders will get one share under the rights issue. The issue price is pegged at Rs 400 per share. Vascon Engineers has received SEBI's approval to raise up to Rs 100 crore through a rights issue. They applied in November. The proceeds of the issue will be used for repayment of loan, to finance the construction of ongoing projects and for general corporate purposes, the company said.

Kishore Biyani's Future Retail, which raised Rs 1,600 crore through a rights issue in January, plans to raise Rs 1,500 crore through issue of non-convertible debentures on a private placement basis this time.