Aban Offshore plans to raise $500 mn by listing Singapore subsidiary

Company plans to utilise the proceedings to repay debt

Aban Offshore Ltd, India's largest offshore drilling services provider to oil companies, is planning to raise around $500 million by listing its Singapore subsidiary. The fund mobilised would be used to repay part of its debt, which is currently around Rs 14,000 crore. Meanwhile, the company also said it would save around Rs 60-70 crore every year, since it has converted major chunk of its loans into dollar-denominated ones from Rupee.

Speaking to Business Standard on the sidelines of company's annual general meeting here today, Reji Abraham, managing director, Aban Offshore, said: "We are waiting for the market to come up, when we get right opportunity we will list the Singapore subsidiary in the Singapore Stock exchange". Aban Singapore is a 100% subsidiary of Aban Offshore.

He added the other possible option would be looking to raise money through bond issues.

Speaking about debt restructuring programme, he said, interest outflow of the company will come down by around Rs 60-70 crore every year. Instead of the 10-year tenure, as scheduled earlier, the company has restructured the tenure to 15 years. Aban had $2.4-billion term-debt on its books on March 31, 2014, which included foreign currency term-loans raised from a slew of banks as well as bonds.

"Now around 97% of the loan are in US Dollar terms," said Abraham, adding that company opted to refinance the debt for a longer tenure of 15 years, aligning it with the long-term nature of the company's assets.

He further said that the interest rate for rupee-term loan was around 12-13% when compared to around 6% in dollar-term loan.

Unlike last year, the company won't have cashflow problem, said Abraham adding that this industry is capital intensive industry and the business cannot grow without debt. "We have proved this right and it was reflected in the recent QIB, which was a good success," he said. Recently the company raised Rs 750 crore through placement of shares to QIBs

Earlier addressing shareholders company's shareholders P Murari, chairman, Aban Offshore Ltd said that the company expects to report an increase in earnings and better performance and a decline in interest outflow, strengthening the company's ability to ride through various market cycles and reinforce its long-term sustain ability.

Company reported 102.74% growth in profit to Rs 393.06 crore compared to Rs 193.8 crore reported a year ago. Murari attributed this to four factors including better utilisation of rigs. First is that as most of the contracts are in US Dollars and the borrowings are also in US Dollars, the company has ensured that it is not affected by currency fluctuation.

The second factor being refinancing its debt for a long tenure of 15 years, which aligned debt tenures with the long-term nature of the company's assets and reduced considerable stress on the company's repayment capability and projected cash flows.

Third is that the company sustained rate for long-term contracts and fourth factor was the company converted all its loans into Dollar denomination, progressively emerging as a currency-neutral corporate with revenues also in Dollar denomination.

He added, the company graduated from legacy to contemporary rates, moved to other new regions with long-term potential, deployed one more rig in Mexico and reinforced its global positioning, with 80% of its revenues derived from international waters as opposed to a decade ago when the reverse scenario prevailed.

Plans to market other owners' rigs

Aban is also planning to look at getting into bareboat business, whereby the company will market idle rigs owned by others in various parts of the world.

There are lots of rigs are idle in yards across Singapore and China, said Reji Abraham

"Some investors have invested in these rigs, but they are not able to market them. We have the market knowledge now. We will earn a fee for marketing these rights," said Abraham, adding that the company can get about $20,000-30,000 a day.