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ENS ECONOMIC BUREAU
MUMBAI, DEC 8: The Tatas will shell out Rs 100 crore to increase the stake in cement major Associated Cement Companies Ltd (ACC) from 13 per cent to 20 per cent through the preferential offer of naked warrants. The board of ACC on Tuesday cleared the warrant issue to the Tata group companies and a rights issue of 1:4 (one share for every four shares held) to all existing shareholders.
On the basis of the present share capital of ACC, the Tata companies - Tata Sons, Tata Tea, Tata Chemicals and their subsidiaries - would be issued upto 90 lakhs naked warrants/equity shares, at a price of Rs 110 per share as per the relevant SEBI pricing formula, the company said in a statement here.
The price of the warrants would be on the face value of Rs 10 each on a cum-rights basis. These figures would need to be adjusted appropriately for the sub-division of shares and also if the warrants/equity shares are exercised or allotted on an ex-rights basis, but without affecting the ultimate percentage holding of the Tatasand the total amount of funds involved.
With this, as and when the warrants and equity shares are allotted, ACC would receive additional equity funds of Rs 100 crore and ACC's equity capital would increase by 6 per cent after the rights issue to a total level of Rs 181 crore.
The board has also decided that it will make a rights issue of equity shares to the existing shareholders after sub-dividing its equity shares, in a bid to meet the total capital expenditure requirements over the next two years, arising out of its growth plans.
In order to pacify the shareholders, the rights issue of equity shares would be in the ratio of one for every four shares held at a price of Rs 55 per share, ie, at a premium of Rs 45 per share on the sub-divided share of the face value of Rs 10 each, the company said, adding that the right issue price represents a discount of around 35 per cent to the current market price of the company's shares as quoted on the stock exchange.
Reacting on the announcement, ACC's scripwitnessed hectic activity but failed to maintain the gain. The scrip opened at Rs 861.50, touched the day's low of Rs 835 and finally closed at Rs 858 as against the previous close of Rs 862.50.
The company has convened extraordinary general meeting (EGM) on January 7 here to get the proposals approved by the shareholders. The rights issue would increase the equity capital by 25 per cent from the present level of Rs 137.57 crore to Rs 171.96 crore and provide equity funds of Rs 189 crore to the company.
The proposed two issues of equity capital would increase ACC's equity capital by about 31 per cent in two stages while providing the company with additional equity funds of Rs 289 crore for its development plans and for strengthening its capital structure.
The company's growth plans through a combination of acquisitions, expansion and modernisation schemes had been the subject of review in recent months, and the board of directors felt it appropriate and necessary for the long-term future of the company,to proceed with its development plans at this stage despite the current state of the industry.
ACC said apart from considering acquisition of existing cement plants, their expansion and modernisation would improve efficiency and profitability while simultaneously adding to its total cement manufacturing capacity over the next two years. This overall strategy was considered necessary to maintain ACC's leadership position in the cement industry.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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