Arvind Mills to raise Rs 263 cr from warrants

The founders of Arvind Mills Ltd have decided to scale up their shareholding in the textiles company by nearly 13 per cent from the existing 33 per cent, through subscription of preferential allotment of warrants.

The founders would subscribe to 50.6 million warrants, convertible into equity within 18 months at Rs 52 a share, the company said in a statement to the stock exchanges. The founders stake would rise to 46.77 per cent from 33.9 per cent on conversion. It will cost the promoters about Rs 263 crore.

The funds are to be used for the company's retail and brands' expansion.

The company's shares touched a high of Rs 63.65 on the news, before ending a good 6.4 per cent up at Rs 61.90 on the Bombay Stock Exchange, against its previous close of Rs 58.20.

Arvind is the latest in a long list of companies whose promoters have been scaling up their stake through warrant issues. Tata Sons, the main investment vehicle of the Tata Group, announced its decision to increase its holding in Tata Steel.

The Aditya Birla Group has done likewise in Hindalco and Mukesh Ambani has followed this route to scale up his stake in Reliance Industries.

According to industry sources, the warrants route is preferred over a direct equity purchase as promoters are required to pay only 10 per cent upfront while the balance can be paid at the time of conversion of the warrants.

Arvind Mills said that the authorised share capital of the company would go up to Rs 450 crore after the conversion of the warrants.

"The company is trying to manage the challenge in its core fabrics and garments business against the backdrop of a rising rupee," said Sanjay S Lalbhai, who has been appointed chairman with immediate effect, to succeed Arvind N Lalbhai who passed away last month. "There is requirement of funds for the growth of the business as well as to augment the net worth."

Arvind which sells brands such as Arrow, Excalibur and Tommy Hilfiger, is relaunching several brands. It is also growing its retail network to cash in on the retail boom sweeping across the country.

The company hopes to get about two-third of its revenue from India In 2007-08, up from half that now.