At a time when Indian companies are struggling to redeem their foreign currency convertible bonds, Haryana-based Amtek India Ltd has raised $130 million (Rs 650 crore) by issuing such bonds on Tuesday, the company has informed stock exchanges. According to the release, the company will use the proceeds for future acquisitions and capital expenditure.
“The FCCBs, which have a maturity of five years and six months, are convertible at the initial conversion price of Rs 103.005 per share,” the company stated. These would carry a semi-annually payable coupon of 6 per cent, the board of directors decided in a meeting held on March 19.
FCCBs are bonds with an equity element although they remain debt instruments as long as investors hold on to those. Investors can convert their holdings into equity when the share price touches the conversion price promised by the issuer. If this does not happen, the issuer needs to treat the bonds as debt and redeem those.
Indian firms extensively raised FCCBs, a quasi-debt instrument, in the bull run of 2005-2007 to fund expansion. With the stock markets nosediving in the past three years, the stock prices of companies have considerably suffered – resulting into fewer conversions into equity shares. Indian companies are now grappling to pay up the bond holders, with around $6 billion of redemptions coming up in the next 12 months.
To ward off the fear of redemption and also to provide bondholders with some level of comfort, Amtek India has promised to redeem the bond at 100 per cent of the principal amount, along with the accrued interest on maturity in 2017.
Standard Chartered Bank was the sole book running lead manager of the issue and the bonds would be listed on the Singapore Stock Exchange.
The share price of the company rose 8.09 per cent to close at Rs 106.20 a share on Tuesday.
Amtek India is majority-owned by public-listed group flagship Amtek Auto, which in turn, is a firm backed by several institutional investors like Warburg Pincus and ChrysCapital. Both the PE firms earlier invested in Amtek India but exited the firm following a group restructuring when the promoters, led by Arvind Dham, in Amtek India to Amtek Auto in a consolidation exercise.
According to BSE data, the company’s turnover, as on December 2011, was Rs 461.02 crore as against Rs 327.23 crore in the previous year. Its profit rose from 24.82 crore to Rs 33.35 crore for the same period. The company’s debt to equity ratio is 1.1.
The Amtek Auto Group is an integrated component manufacturer with 43 manufacturing facilities located in India (39) and Europe (4). In 2006, Amtek Auto had raised $250 million through FCCBs and in January this year, the company extinguished the remaining part (worth $147 million) of the bonds by redeeming them.