Sesa Goa, which on Thursday announced it was buying the mining assets of the Dempo group for Rs 1,750 crore, will raise Rs 600 crore through a preferential allotment of shares to Vedanta Resources plc, its parent company.
Vedanta, owned by NRI entrepreneur Mr Anil Agarwal, will subscribe to 3.32 crore equity shares of Sesa Goa increasing its stake from 53.1 per cent to 55 per cent. The transaction is expected to be completed by July.
Sesa Goa’s shares were up six per cent at Rs 203 on the BSE on Friday.
Separately, Vedanta said it has raised $1.25 billion (about Rs 6,000 crore) through an issue of convertible bonds.
“If the preferential allotment is made at a discount to the current market price (of Sesa Goa) then it will have a negative impact on earnings per share. However, the opportunity to tap new markets and bargain better prices for iron ore shipments will improve both revenue and profitability,” said an analyst.
Convertible bonds
According to a Vedanta press release, the convertible bonds due 2016 will have a coupon of 5.50 per cent payable semi-annually in arrear and will be convertible into fully paid ordinary shares of the company.
The bond will have a maturity of seven years with five year put option. The conversion price is $36.48, representing a premium of 35 per cent to the volume weighted average price of the ordinary shares on the London Stock Exchange on Friday. J.P. Morgan Cazenove was the sole book-runner for the bond offering.
Vedanta, listed on the London Stock Exchange, will use the proceeds to support its organic growth pipeline, to increase ownership in its subsidiaries and for general corporate purposes.
The release quoted Mr Anil Agarwal, Chairman of Vedanta, as saying that the proceeds of the bond issue would provide the company with additional financial flexibility to continue its strategy of investing in organic growth projects and making selective acquisitions.
As part of its expansion plan in India, Vedanta Resources plans to invest Rs 60,000 crore by FY11 by which time it has targeted becoming the world’s largest zinc producer and the third largest in aluminium and mining.
The company is setting up a two million tonne aluminium unit in Jharsuguda, Orissa and five million tonnes of alumina at Lanjigarh (also in Orissa) while group company, Balco is readying six lakh tonnes of aluminium capacity in Chhattisgarh.
Captive power plant
A 3,600-MW captive power plant has also been planned at Jharsuguda. Vedanta is doubling copper production to eight lakh tonnes in Tuticorin.
“Potential for metals in India is enormous. Australia, Canada and South Africa account for 53 per cent of minerals whereas India with similar geological parameters accounts for just three per cent,” Mr Agarwal said in an interview to this paper recently.
Source: The Hindu Businessline