Jyoti Structures to issue of NCD’s with detachable warrants: Angel Broking

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Jyoti Structures to issue of NCD’s with detachable warrants
JSL would be issuing non-convertible debentures (NCD) with detachable warrants to its
existing shareholders on a Rights basis. Record date for the above issue has been fixed as
January 15, 2011.

As per the terms of the issue, the existing shareholders would be eligible to receive
10.26mn NCD’s of the face value of `120 each together with 20.52mn detachable
warrants of `120 each. The ratio of allotment has been fixed as 1 NCD with 2 detachable
warrants for every 8 shares held as on the record date. The interest rate for the NCD has
been fixed at 7% p.a payable quarterly, from the date of allotment till the date of
redemption.
The above NCD’s are to be redeemed at the end of 15 months from the date of
allotment. The warrants would have to be exercised within 18 months from the date of
allotment during the periods designated for the conversion viz., August 15, - September
15, 2011, February 15 – March 15, 2012 and June 15, 2012 to the end of the 18th
month from the date of allotment.
Excluding the conversion of warrants, the company would receive `123cr from the issue of
NCD’s. Assuming full conversion, total proceeds from the above issue including the
conversion of warrants would be `369cr.


The transmission and distribution (T&D) EPC requires significant working capital as
substantial amounts gets tied up to finance the purchase of materials and the
performance of engineering, construction and other work on projects before payment is
received from clients. Going forward, increasing order intake and the opportunities
available in the BOOT / BOOM projects would necessitate the infusion of funds, both
through debt and equity.
Total debt in JSL’s books at the end of 2QFY2011 stood at ~`390cr with an average
interest cost of ~11% p.a. The NCD issue of `123cr would enable the company to reduce
its interest cost by 3-4% during FY2012; the NCD’s are expected to be redeemed during
March-April 2012. Though the conversion of warrants (assuming full conversion during
FY2012) would help in reducing the interest cost, we expect marginal dilution in forward
EPS. We would be revising our earnings estimates post the 3QFY2011 results. We
maintain a Buy on the stock, with a Target Price of `215.