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L&T Raises $600 Mln Via Share Sale, Bonds

09 October, 2009

India’s top engineering and construction firm Larsen & Toubro Ltd on Thursday said it had raised $400 million through a share issue to qualified institutional buyers and another $200 million by issue of convertible debentures.

The funds will help strengthen the company’s financial position and allow it to bid for large upcoming projects, a top official said.

“This will be used for growth capital. There are opportunities coming up in infrastructure, power and surface transport, and we prefer to raise the capital and stay prepared,” Executive Vice President R. Shankar Raman told Reuters.

L&T has benefited from a construction boom in the past few years as India revamps its airports, roads and adds industrial capacity, and currently holds an order backlog of around 800 billion rupees ($17 billion).

While the global financial crisis slowed the economy and pressured firms to scale back expansion plans, the government’s recent focus on boosting rural infrastructure and speeding up road construction has raised revival prospects for the sector.

Last month, Chairman A. M. Naik told shareholders the company expects to win fresh orders worth $2 billion in the next few weeks. The company had earlier guided for a 25 percent growth in order book for the fiscal year 2009/10.

“We are adequately funded. With this round, we are pretty much done for this fiscal,” Shankar Raman said.

L&T currently holds cash reserves of about $1 billion, he said.

SALE TO FOREIGN INVESTORS

The $400 million share sale has been done at a 1 percent discount to Wednesday’s close of 1,677.40 rupees, while the bonds, which have a coupon rate of 3.5 percent, have been issued at a 15 percent premium to Wednesday’s closing.

“Assuming the company continues to grow, the net realised capital is more favourable…it balances the structure,” Shankar Raman said.

The bulk of the funds had been raised from foreign investors.

The fund raising was handled by Citigroup, a person familiar with the deal said.

Larsen has outlined capex spend of 15 billion till March 2010. In the last month, it has also agreed to buy Cholamandalam DBS Finance’s CHLA asset management company and said it plans to enter the insurance business.

“We have adequate cash on our books to separately take care of the capital expenditure plans,” Shankar Raman said.

Indian firms have raised about $15 billion through share sales in the past six months, encouraged by a share market that has risen 74 percent so far in 2009. India’s benchmark index hit a 16-month high last week.

Shares in the company, which the market values at $21 billion, fell as much as 2.8 percent in a choppy Mumbai market after the announcement. At 0532 GMT, the stock was down 2.4 percent at 1,637 rupees.


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L&T Raises $600 Mln Via Share Sale, Bonds

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