UltraTech CementNSE 2.05 % is planning to raise Rs 9,000 crore via an issue of redeemable, non-convertible debentures on a private placement basis, the company said on Friday, while notifying the exchange NSE 0.00 % of its annual general meeting to be held on July 18. It plans to seek shareholders’ nod for the issuance on the AGM.
UltraTech last month announced the acquisition of the cement business of Century TextilesNSE 0.17 % and Industries and it was to be financed through a share swap, besides taking on Century’s debt of Rs 3,000 crore.
UltraTech has also aggressively bid for Binani Cement under the bankruptcy code that seeks resolution of distressed assets in the country.
The cement maker also recently commissioned its greenfield clinker plant of 3.5 MT in Manawar in Madhya Pradesh with a grinding facility and waste heat recovery system at the site still to be constructed before September 2018.
UltraTech ’s net debt at the end of March, 2018 stood at Rs 12,007 crore and net debt to EBITDA ratio at 1.85x. It increased to Rs 17,000 crore after it announced the Century acquisition, pulling up its leverage to 2.35x. KK Maheshwari, UltraTech’s MD, said that with the company generating cash every year, the leverage was within comfort levels.
However, if it is successful in acquiring Binani for which it has bid close to Rs 8,000 crore, its leverage is bound to cross 3x. “This is okay in the short term, but if cement prices do not improve pulling up the EBITDA, the leverage will become a cause of worry,” said Prateek Kumar, cement analyst at Antique Stock BrokingNSE 0.00 %.
In a recent move, India Ratings had affirmed the AAA rating to the cement maker with a ‘Stable’ outlook based on its strong market position and line-up of acquisitions along with a good cash flow generation and liquidity.
Ind-Ra said the company has been reporting positive cash flows from operations and free cash flow for over a decade and it expects the trend to continue based on a stable working capital cycle as well as profitability.
But it conceded that the company’s per tonne EBITDA could remain under pressure due to rising fuel prices.
Source: Economic Times