International Finance Corporation (IFC), the private sector arm of the World Bank Group, is acquiring 8.9 per cent stake in public-listed Ramkrishna Forgings Ltd for Rs 27.5 crore ($5 million). IFC earlier said that it was planning to invest $20 million in the Kolkata-based manufacturing firm, but did not clarify the equity and/or debt portion of the funding.
Ramkrishna Forgings is now setting up a press project at Kolabira in Jamshedpur to manufacture forged and machined auto components such as front axle beams, crankshafts, connecting rods and stub axles, for an estimated cost of $97 million.
The project will be financed through a combination of debt and equity. While the term loan will bring in $63 million, the rest will come through equity and internal accruals, according to the company.
As per the deal, IFC will invest around $5 million in a preferential allotment, picking shares at Rs 128 a unit. The promoters of the firm will bring in Rs 10 crore upfront in a simultaneous fresh equity issue and will also pick equity convertible warrants worth Rs 40 crore at a marginally higher price of Rs 130 a share.
If the warrants are not converted, IFC will own around 10 per cent stake. This will, however, shrink to 8.9 per cent post the dilution of the capital base when warrants are converted into equity.
Ramkrishna Forgings’ scrip last traded at Rs 120.15 a share, down 1.3 per cent on the BSE in a flat Mumbai market on Tuesday.
The company has already tied up $14 million as term loan from the IFC and Rs 100 crore ($18.4 million) from the Exim Bank for the above project. The company expects to make an entire tie-up for the term loan shortly.
Founded in 1981, RKFL manufactures and sells open and closed plain carbon and low-alloy steel forgings for railways, automobile and general engineering purposes. The company, which went public eight years ago, had earlier received funding from Phi Advisors and Ascent India Fund. The latter is a major shareholder and currently owns 12.19 per cent in the company. But this will shrink to around 9.1 per cent post dilution.