Karuturi Global, better known as India’s largest rose exporter, is understood to have finalised its plans to raise $150 million (close to Rs 690 crore) equally between FCCBs (Foreign Currency Covertible Bonds) and debt. The company is raising $50 million through FCCBs with a greenshoe option of $25 million. In addition to this, an additional $75 million is expected to be tied in as debt at Libor plus 400 points. While the FCCBs are expected to be in place by month-end, the debt is expected to be in place in the next two months.
The company is pressing ahead with its fund-raising plans to expand its agriculture export business from its fields in Ethiopia and this vertical may soon overtake the revenues from rose exports in the next couple of years.
Karuturi Global, a Rs 700 crore firm, has been deriving 95 per cent of its revenues from rose exports and this has been very profitable for the company. While each stem is sold in the range of 11-12 Euro cents, its cost of production is around 7 Euro cents, a margin of around 60 per cent on each rose stem. The company has around 550 acres under roses which is being expanded by adding another 150 acres in the near future. The company expects around Rs 80 crore of revenues from the agriculture business during the present fiscal, the first year of the diversification. In addition to this large scale diversification, Karuturi Global has been into the business of cultivating gherkins which brought in revenues of Rs 15 crore during last fiscal.
Sai Ramakrishna Karuturi, MD, Karuturi Global declined to comment on the fund raising instruments. Karuturi Global has been allotted a little over 840,000 acres in Ethiopia to develop the agriculture land on which the company will grow cereals (maize, wheat, rice), fresh vegetables, palm oil and then at a later stage will get into sugarcane. Company officials told Business Standard they will kick-start cereal crop cultivation to start with and will be sold to African markets while the fresh vegetables will be exported to the UK.
This is the second time in three years Karuturi is resorting to leveraging the FCCB route. During 2007, it raised $75 million in two tranches of $25 million and $50 million. Global investors, including Goldman Sachs, Credit
Suisse, Morgan Stanley had participated in the earlier FCCB fund raising.
FCCBs are convertible bonds and is a mix of debt and equity. It acts like a bond by making regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock. These types of bonds are attractive to both investors and issuers. The investors receive the safety of guaranteed payments on the bond and are also able to take advantage of any large price appreciation in the company’s stock. Bondholders take advantage of this appreciation by means of warrants attached to the bonds which are activated when the price of the stock reaches a certain point. Due to the equity side of the bond, which adds value, the coupon payments on the bond are lower for the company, thereby reducing its debt-financing costs.
The promoters, led by Sai Ramakrishna Karuturi, hold close to 52 per cent in the company and post the dilution after five years, their stake is expected to come down to 46 per cent. It is understood that the FCCBs will be subscribed at a 15 per cent premium over the current price. The stock on National Stock Exchange closed at Rs 18.85 per share on Wednesday, with a market capitalisation of close to Rs 925 crore. The company has debts of close to Rs 460 crore including the FCCBs of Rs 345 crore.
