JK Paper Ltd is raising Rs 225 crore (€35 million) from a consortium of Dutch, French and German development financial institutions (DFI), through an issue of Foreign Currency Convertible Bonds (FCCBs), the company said in a filing to the stock exchanges. The funds will be raised from FMO (Dutch DFI), DEG (German DFI) and Proparco (French DFI) to part-fund a capacity expansion plan.
JK Paper, the country’s second largest paper company behind Ballarpur Industries, had earlier announced an expansion programme in Orissa worth Rs 1,500 crore. It intends to raise the capacity at the Orissa unit from 2.4 lakh tonnes to 3.6 lakh tonnes. The company had also announced a proposed rights issue to raise Rs 250 crore earlier this year.
The FCCB issue to FMO, DEG and Proparco will be at an initial conversion price of Rs 65 per share or 14 per cent premium to the latest market price of the company. The FCCBs are convertible into equity shares any time after three-and-a-half years from the date of issue and if the FCCBs are not converted, they are repayable between 5th and 7th years from the date of issue.
Promoted by the diversified Delhi-based Singhania Group, JK Paper counts among its existing investors IFC, which had picked close to 10 per cent stake in the paper company five years ago through a preferential allotment worth Rs 50 crore at Rs 65 per share, the same conversion price at which the firm is issuing FCCBs. IFC is sitting with 12 per cent unrealised loss on its five-year-old investment.
Although the recent deal in the paper sector where International Paper acquired majority stake in Andhra Pradesh Paper Mills at a high valuation, did boost paper scrips momentarily, JK paper share price performance has been less than flattering over the past few years. The company is currently trading just about four times its expected earnings per share for the year ended March, 2011.