Aditya Birla Nuvo, the fertiliser to financial services diversified company, is expecting equity infusion of about Rs 600 crore from its billionaire promoter, Kumar Mangalam Birla, in the current financial year in the form of warrant conversion. Another Rs 400 crore is expected in the next financial year.
Nuvo allotted 18.5 million shares to the promoter group companies in June, at the conversion rate of Rs 531.19 a share. The warrants, constituting about 10 per cent share capital of the company, would expire in 18 months.
“This is to meet the guidelines of the market regulator, which does not allow promoters to acquire more than 5 per cent stake in the company through creeping acquisition or conversion of warrants,” said a company executive.
“The company has already received about Rs 250 crore in the form of commitment money for the warrants allotted and an additional Rs 325 crore is expected to come in the current financial year,” he said.
The move is significant, as the promoter companies (majorly owned by Kumar Mangalam himself) earlier did not convert 18.8 million warrants allotted to them in February 2008, which jeopardised Nuvo’s plan to raise about Rs 4,000 crore. In May, the promoter companies said they would not convert, as the share prices had fallen about 70 per cent below the conversion price of Rs 2007.45.
Nuvo has lined Rs 1,800 crore capital expenditure till 2010-11, primarily to grow its life insurance business. The business is expected to contribute close to half of the company’s revenue by then.
The company requires equity to expand because its debt is already high. At the end of the last financial year, it had Rs 4,300 crore of debt, while its net worth was Rs 3,744 core. The company also had a treasury surplus of Rs 800 crore, which gives it a net gearing of 0.93. This gives Aditya Birla Nuvo little room to raise fresh debt.
The company is in talks with leading private equity firms to divest stake in a holding firm that would house its six financial services. This includes the life insurance and asset management company under the Birla Sun Life brand name, besides the wealth management, broking and private equity business of the group. Such a move would give the company financial muscle to grow.
On Monday, stocks of Nuvo closed at Rs 900 a share, about 69 per cent higher than the conversion price allotted to the promoter in June.
