Guj Ambuja to buy back $80mn debt

Gujarat Ambuja Cements, India's fourth largest cement maker, is planning to exercise its call option for buying back around $80 million of its outstanding foreign currency convertible bonds (FCCBs).

The company will repay bond-holders if they do not convert the loan into equity shares.

Gujarat Ambuja has the choice to exercise the call option after January 31, at a conversion price of Rs 222 a share. So far, about 20 per cent of the $99 million FCCBs have been converted into equity.

Analysts expect the actual outgo for the company to be much less, as the conversion price is lower than the ruling stock price.

The company will be issuing a call notice of a duration of 40 days to the bond-holders to convert their bonds into equity shares.

Anil Singhvi, executive director, Gujarat Ambuja told Business Standard : "We will be issuing a 40-day notice to bond-holders next week, for conversion."

In case bond-holders do not convert their bonds, we will exercise our call option of redeeming the bonds after January 31."

Gujarat Ambuja had floated the $99 million FCCB issue in January 2001. The conversion rate is 23.1 per cent lower than the ruling price of the Gujarat Ambuja scrip.

The Gujarat Ambuja stock closed at Rs 288.55 a share on the BSE on Friday and has been in the region of Rs 300 per share in the two months since the conversions began.

"We are expecting the entire conversion to take place within the 40-day call notice period since the bond-holders are deep in money, and considering the Gujarat Ambuja scrip has been in the region of Rs 300," Singhvi said.

In case the conversion did not materialise, the company would pay back the debt through internal accruals. But if the FCCBs are fully converted, the equity base of the company will swell Rs 20 crore to Rs 176 crore, with an addition issue of around 20 million equity shares.