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Rolta, Mumbai-based IT products and solutions provider is all set to hit the road to raise $200 million (around Rs 1,080 crore) through the issuance of bonds through its international subsidiary.
The company is primarily looking at raising these funds to retire some of its high cost rupee debts. Also this refinancing will give the company more US dollar liability which will also act as natural hedging.
When contance, Hiranya Ashar, CFO and director finance, Rolta said: “We are looking at a bond issue. We have just announced our intention and we still need to meet investors for this. Once the road shows start we will be in a better position to decide the potential of raising these funds.”
The company has around Rs 700-800 crore of debt in rupee, which it plans to convert to dollar loans. Analyst said that his will help bring down the interest cost. Rupee loan in general has interest rates in the range of 11-12 per cent, whereas some of the recent overseas loan (international currency) raised by some of the Indian corporates attracted interest rate of 5.25 per cent and 5.8 per cent.
Analyst also pointed out that with Rolta’s dollar revenue overtaking Indian business, raising funds overseas will be much more feasible for the company.
Standards & Poor’s Rating Services today assigned BB- rating to the proposed senior unsecured notes. “Rolta's small size limits its ability to compete with global IT services peers. It’s business requires significantly higher investments than that of pure-play IT services companies, resulting in negative free operating cash flow," said Standard & Poor's credit analyst Katsuyuki Nakai.
The S&P note also said that the company's debt-to-total capital ratio of about 60 per cent and fixed-asset turnover ratio of about 0.5x are both weaker than peers'. Rolta's fixed-asset turnover ratio is also well below the industry average. Rolta has invested significantly to acquire IPRs and increase its share of own-IPR-based solutions.
We expect Rolta's FOCF to remain negative in fiscal 2013, with capital expenditure and investment to acquire IPR at Rs 1,250 crore. “We anticipate that Rolta's capital expenditure will fall to less than Rs 600 crore in fiscal 2014 and to less than Rs 300 crore in fiscal 2015 and beyond. As a result, we expect the company to have positive free operating cash flow from fiscal 2014.
