Hinduja Foundries is planning to come out with a Rs 125-crore rights issue even as the the country’s largest casting maker is facing delay in its proposed plant at Toopran in Andhra Pradesh.
The company, promoted by Ashok Leyland and Hinduja Automotive, would vacate the land acquired for that endeavour if it does not receive one more year’s extension, its managing director B Swaminathan said. The 1959-founded firm, with three plants now, has sought to restructure its loans to the tune of Rs 205 crore.
“We have asked the banks to defer the repayment of the principal amount in the event that there are any unanticipated downturns in the industry,” Swaminathan said in a statement here.
The investment of Rs 70 crore is towards equipment for capacity balancing and machining. “We are equally focused in improving capacity utilisation by 30 per cent. There are also plans to expand our capacity and commence supplies in the larger weight segment of up to 500 kg casting weight,” he added.
Last year, the city-headquartered company had raised Rs 50.27 crore by issue of equity shares on a rights basis. One of the main objectives, constituting more than 50 per cent of the issue size, was capital expenditure on the existing plants.
The draft offer document said Hinduja Foundries’ business strategy or growth plans might require it to raise additional capital in the future. “This could be through debt or equity capital, including through issue of shares to our promoters,” it noted. “If we raise further equity capital, there can be no assurance that such an issue will be on a rights basis. Any issue of shares other than on a rights basis will lead to a dilution of your equity stake.”
As for its plan to set up a green-field manufacturing unit at Toopran, the company recalled that it had already acquired 60 acres of land from the state government — and paid Rs 15 crore.
The transfer of land was conditional on the commencement commercial production by the end of the current financial year.
“However, since we were unable to complete the project within the time allotted due to adverse market conditions, we sought and received an extension upto March 31, 2012,” the document said. If the company was still unable to complete the project and commence commercial production by then, “we will be required to seek another extension or vacate the land”.
It further noted that if the company did not receive the extension, “we will not be able to recover the capital expenditure that has been incurred on the project. As of September 30, 2011, we have incurred capital expenditure of Rs 31.19 crore.”
The company further said it had to restructure some of its loans.
Some of its existing lenders, like State Bank of Travancore, IDBI, Karur Vysya and State Bank of Mauritius did permit it to defer the repayment of the principal amount — Rs 4,000 lakh, Rs 10,000 lakh, Rs 5,000 lakh, and Rs 1,500 lakh respectively. In the event of any unanticipated downturns in the industry or a continued slowdown of the econ omy, and/or inability to repay the loans, “we cannot assure you that we would be able to restructure our loans with our lenders in the future”, the draft letter added.
