Mumbai, Oct. 8 Larsen & Toubro raised $600 million (Rs 2,880 crore) on Thursday through a mix of foreign currency convertible bonds ($200 million) and a qualified institutional placement ($400 million).
While the QIP was made at one per cent discount to Wednesday’s closing price of Rs 1,677.40, the FCCBs were issued at a 15 per cent premium. The company diluted 1.9 per cent stake through the issue.
The FCCBs have been issued for five years and can be converted any time. However, given the premium of 15 per cent, an investor will have to hold the bonds for some time to book profits.
The L&T scrip fell two per cent to Rs 1,650 on Thursday. Companies have raised Rs 27,900 crore through the QIP route this fiscal, of which Rs 4,200 crore was in the first quarter.
Mr R. Shankar Raman, Executive Vice-President (Finance), L&T, said the funds raised would help the company bid for infrastructure and ultra mega power projects (UMPPs) announced by the Government.
L&T’s expertise lies in executing large turnkey power projects and it now wants to explore opportunities on its own. Though it had bid for a few power projects earlier, it was not successful.
The money raised will be kept as a corpus to bid for future power projects, Mr Raman said. “We propose to invest between Rs 30,000 crore and Rs 50,000 crore in the next five years in power projects. About Rs 5,000-10,000 crore can be managed through internal accruals. We have identified a few power projects and they are at the discussion stage now,” he said.
The hydropower projects will come up either in Himachal Pradesh or Arunachal Pradesh, while the company has zeroed in on Maharashtra and Karnataka for the thermal plants. However, the location may vary depending on access to fuel.
As for L&T’s performance in the second quarter of this fiscal, Mr Raman said, “We have bagged some big orders in infrastructure sectors such as roads, railways and power projects. The second quarter will definitely be better than the first quarter.”
Meanwhile, Moody’s Investors Service has retained the ‘Baa2’ issuer rating and negative outlook on L&T.
“The announced equity and FCCB issues will only have a limited impact on L&T’s consolidated credit metrics, given that the company will require additional funding to support its large expansion plan over the medium term.
Therefore, this fund raising exercise has no immediate impact on its rating or rating outlook,” said Mr Ivan Palacios, Lead Analyst, Moody’s Investors Services. L&T’s consolidated debt stood at Rs 18,400 crore as of March 2009.