Elbee Services, the Rs 56-crore courier major, is planning to raise between Rs 15-20 crore through private placement of equity shares. The funds will be used for working capital and to retire high-cost debt.
Confirming the move, Sandip Shah, chairman and managing director, Elbee, said talks are on with a prospective investor, but declined to divulge any names.
"The placement is being done in order to augment working capital and retire high cost debt and the deal will be finalised soon," he added. The promoters hold around 60 per cent stake and the infusion is likely to bring it down to 51 per cent.
Elbee is third courier company to opt for private placement to raise fund long-term plans.
Blue Dart Couriers had completed a private placement with Schroeders, a European FII in 1996. The promoters of Airfreight, which partners DHL, are also planning to shed stake in the company to FIIs to fund their long-term plans.
Elbee plunged into a loss of Rs 3.41 crore for the first six months of 1997-98 thanks to high interest costs, higher expenditure and depreciation charges.
Interest costs rose by a whopping 621 per cent to Rs 4.77 crore in the first half of 1997-98 from Rs 66 lakh in 1996-97. Expenditure went up by 12.5 per cent to Rs 55.34 crore from about Rs 50 crore. Depreciation costs rose by about 25 per cent to Rs 2.10 crore from Rs 1,68 crore.
Elbee Services' proposed 50:50 joint venture, United Parcel Service (UPS), is expected to be operational by April, 1998 said Shah. The venture was yet to obtain the clearances from the Foreign Investment Promotion Board. "The venture is in the process of being formed," Shah added.
Currently, the two companies enjoy a principle to principle relationship. Under this arrangement, UPS gets the revenue for the overseas leg of the transportation of cargo while Elbee gets it for the domestic leg. Elbee had secured the approval for the formation of the joint venture at an extraordinary general meeting last July.
The proposed venture in fact, is the product of UPS' threat to launch its operations in India alone as it felt Elbee was not paying enough attention to the international leg of the business. At this point Elbee suggested a joint venture which was accepted by UPS.
