Sterlite Industries, a non-ferrous metal producer and subsidiary of Vedanta Resources, announced a massive fund raising exercise, with the amount exceeding media reports. The company, with 2008-09 revenues of Rs 21,144 crore or $4.4bn, has said it will raise about $1.5bn with the promoter subscribing to $500mn or about one-third of the issue. The issue will be priced at $12.15 or Rs 583 per ADS. Sterlite’s market price which closed at Rs 629 is down by 8.3% at Rs 577 at 11.24AM on the BSE.
The company will be issuing about 12.3 crore shares under the issue, leading to an equity dilution of 17%. If the greenshoe option is exercised the dilution will increase. That partly explains why its share price fell on the news.
The underwriters to the issue can retain up to 15% of the excess subscription, excluding what Sterlite subscribes to. That amounts to $150mn, taking up the total funds the company could raise to $1.65bn or Rs 7,900 crore. The company has said it will use the funds for developing its power generation business, potential acquisitions, capital expenditure and other general purposes.
Sterlite’s stake will come down to 57.5% after the issue from 61.7% and may come down further, depending on the over-subscription that is retained. In 2008-09, Sterlite’s revenues declined by 14.4% while its profit declined by 19.5% to Rs 3,540 crore or $738mn.
JP Morgan Securities Inc and Morgan Stanley & Co. International plc are the joint bookrunners for the issue.