Balrampur plans stock split, pref issue

Balrampur Chini Mills is planning to go for a stock split as well as issue fresh equity shares on preferential basis.

The preferential issue is being done to fund company's ambitious expansion plan. BCM, the single largest integrated sugar company, is considering to invest Rs 400 crore to set up two greenfield sugar complex.

In an intimation to the stock exchanges, Balrampur has informed that the board of directors of the company would meet on Saturday to consider preferential issue and stock split.

The expansion would be funded by issuance of preferential share, 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.

The rest Rs 200 crore would come from internal accrual and fresh equity.

Market sources said number of domestic as well as foreign financial institutions had shown interest in picking up a stake in the company.

"The sugar industry is on a roll and there are interest among people to be part of a leading company in the sector," sources added.

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.

Further, Balrampur is also exploring the possibilities of setting up another greenfield sugar complex. The location for the second project is yet to be identified.

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.