Welspun in talks to raise funds for expansion

Terry towels exporter Welspun India has initiated talks with international finance agencies and domestic financial institutions such as the State Bank of India, Bank of Baroda and Punjab National Bank to raise Rs 325 crore for its expansion plan.

The company is also in talks with the World Bank and other international institutions to raise funds for its expansion. Welspun, a company with a turnover of more than Rs 400 crore, plans to double its towel production capacity to 24,000 tonne and install an annual sheeting capacity of 33 million metre.

In order to meet the growing demand of terry towels in the international market, Welspun India is in the process of setting up a new facility at Kutch with an investment of around Rs 500 crore.

B K Goenka, vice-chairman and managing director, Welspun India, said: "We are looking at raising Rs 325 crore from local lenders as well as foreign institutions. Although we have not finalised the exact break-up of the loan to be raised from either of the lenders, we will take a decision on this soon."

The company is looking at raising the loan for a seven-eight year period. He also added that SBI Caps has appraised the project. The new plant will be commissioned by December 2004.

Goenka said that the average cost of borrowing for this loan will be less than five per cent. The funds raised from the domestic lenders will form a part of the technology upgradation fund, alloted by the government to textile companies for expansion and modernisation of their textile units.

The company's total expansion project of Rs 500 crore will be funded by a mixture of internal accruals, equity issue and term loans. While Rs 110 crore would be funded through the equity route, Rs 65 crore will be invested from the company's internal accruals.

Recently ICICI Venture Funds Management had pick up a 14.50 per cent stake in the company at a consideration of Rs 75 crore through a preferential offer of 79.41 lakh shares aggregating to Rs 68.21 crore at a price of Rs 85.90 and 8.82 lakh convertible warrants with an option to convert into equity at the same price within 18 months.