Balrampur Chini to raise Rs 113 cr via pref issue

Balrampur Chini Mills, the single-largest integrated sugar company in the country, is raising about Rs 113 crore by issuing preferential shares to two foreign investors to fund its expansion.

The board, which met on Saturday, also decided on a stock split. For each share of Rs 10, existing shareholders will get 10 shares with a face value of Re 1.

BCM will issue 17,08,000 shares to Citicorp International Finance Corporation and 2,24,000 shares to New Vernon Bharat Ltd at Rs 585 per share, 16 per cent discount to the Friday's closing price of Rs 696.

Post dilution of equity, Citicorp and New Vernon will hold 7.37 per cent and 0.97 per cent stake in the company. Promoter's stake would come down to 34.19 per cent from 37.3 per cent, a company official said.

The foreign institutional investors (FIIs) will carry out due diligence before investment. The deal is also subject to regulatory approvals and a mutually acceptable shareholder agreement and shareholders' approval.

BCM plans to invest Rs 400 crore to set up two greenfield sugar complexes. The expansion would be funded by the preferential issue, debt and internal accrual.

Given that debt-equity mix of 1:1 is followed in the sugar industry, BCM could raise about Rs 200 crore as debt. IFC Washington is one of its long term lenders with an exposure of $15 million.

BCM is setting up a greenfield sugar plant in Uttar Pradesh with capacity of 7,000 tonne crushed per day (TCD).

It will also increase the crushing capacities at various existing units by 4,000 TCD. The entire project cost was around Rs 200 crore.

The company's project was well timed as the industry was expecting a hand-to-mouth situation, which was expected to push prices up.

The total sugar production had dropped to 13.6 million tonne in 2003-04 from 20 million tonne and was expected to drop further by 5-10 per cent, this year.