Ceat raises Rs 45.69 cr for expansion, modernisation

Leading tyre manufacturer Ceat Ltd today said ICICI Bank, Bahrain, has sanctioned external commercial borrowings (ECBs) worth over Rs 45.69 crore ($10 million) to meet the costs of its expansion and modernisation programme.

The company projects a revenue enhancement of up to Rs 150 crore, largely accruing in the coming financial year as a result of this initiative, Ceat informed the Bombay Stock Exchange.

Ceat raised the 6-1/2 year ECB at an interest rate of 160 basis points above the prevailing six months Libor and has also made arrangements for hedging to cover the future forex risk on drawdown basis, it added.

Part of the proceeds of the ECB would be utilised to enhance the radial capacity in its Nasik plant from 40,000 tyres to 1,00,000 tyres a month in two phases. The enhancement would largely be in passenger car and utility vehicle radials and also in some LCV sizes.

The rest would be utilised in capacity addition of its OTR (off the road) and niche products capacities, as also in modernisation of mixing facilities at its Bhandup plant.

Ceat has been working towards a lower cost of capital over the last three-four years. It has reduced its interest cost to 3 per cent of gross sales this year, down from 10 per cent on the back of its debt restructuring programmes.

The company projects a further drop in its interest cost to 2.5 per cent in 2007.

In another financial re-engineering initiative aimed at enhancing corporate governance norms at Ceat, the Mumbai High Court recently approved the scheme of amalgamation of its three wholly owned subsidiaries "" Ceat Ventures Ltd, Ceat Holdings Ltd and Meteoric industrial Finance Company Ltd, with the company.

The shareholders have also approved the balance sheet prepared post-restructuring at the recently held AGM on September 25.