Sterlite plans rights to rake in Vedanta funds

Sterlite Industries is planning to expand its equity base through fresh issue of equity shares on a rights basis.

The existing paid-up capital of Rs 17.94 crore could swell by around 35-40 per cent, sources close to the development told Business Standard.

The company's board will take a decision on December 24 on the share ratio and pricing of the shares. The Sterlite scrip today closed at Rs 1280.95 per share at the Bombay Stock Exchange.

Vedanta Resources, which holds 55.1 per cent stake in Sterlite, has recently raised $1 billion at the London Stock Exchange (LSE) through an initial public offering. Vedanta will use the rights issue route to bring in fresh capital for the company.

The money will be used to fund its expansion projects in group companies Bharat Aluminium Company (Balco) and Hindustan Zinc.

"The aim of listing Vedanta Resources - Sterlite's holding company, at the London Stock Exchange, was to bring in funds for capacity expansion at Balco and HZL. The issuance of shares is to enable the transfer of funds from Vedanta to Sterlite," sources said.

The existing paid-up share captial of Sterlite consists 3.59 crore shares with a face value of Rs 5 a share.

While Vedanta Resources holds 55.1 per cent stake in Sterlite, 7.1 per cent is held by Madras Aluminium Company and about 21.2 per cent by the Indian public.

Sterlite has slated a total investment of around $2 billion over 3 years in 4 expansion projects.

The company will be investing $800 million for the expansion at Balco to take the installed capacity to 3.5 lakh tonne per annum and $800 million for setting up an alumina refinery in Orissa with a capacity of 1.4 million tonne per annum.

Out of the proceeds of the Vedanta IPO about $225 million will be utilised for Balco and $400 for the alumina refinery at Orissa.

Sterlite has also lined up $465 million for capacity expansion at HZL and about $100 million for its copper smelter.

HZL had raised about $125 million though the external commercial borrowings route for funding its capacity expansion.

Vedanta Resources raised $1 billion at £3.9 per share. Vedanta is angling to become a part of the FTSE-250 index, according to a source. The Vedanta issue is the third largest in the world from a mining company.