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Orient Paper and Industries
Cement expansion formalized; 6% dilution on the cards
Orient has formalized its expansion plans in Cement via a 3m-ton
greenfield plant in Karnataka for `17.2bn. It will issue 12m
warrants, convertible into equity shares at `57.25 to the promoter
(leading to dilution of 6%), to part fund the project. Maintain Buy.
Cement expansion formalized. Orient has formalized its plans of
expansion in Cement by announcing a greenfield project. The
Board, at its meeting on 4 February, approved setting up of 3m-ton
cement plant in Gulbarga district of Karnataka. The company has
completed the limestone prospecting study and is in possession of
half the required land. The project involves 50MW of power plant,
of which 25MW is planned to be sold on merchant basis.
Project funding. The project is expected to cost `17.2bn (of which
`14.7bn is for Cement). The equipment is likely to be ordered by
2QFY12 and the commissioning time is estimated to be 2QFY15.
Funding would be done at a debt-equity ratio of 1:1. The company
plans to part fund the equity component through a `687m warrant
issue to the promoters. It will issue 12m shares at `57.25/share.
EGM to seek shareholders approval is slated for 7 March. Of the
issue amount, 25% requires to be upfront payment, with the
remaining to be paid within 18 months.
Our view. We see the decision to expand in Cement as positive,
given the division’s better outlook and high ROCE vs. other
businesses of Paper and Electricals. A 6% dilution would enable the
promoter to raise their stake by 3.4% (paying 15% premium to
market price) and help keep net leverage lower than 0.7x (0.6x now).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Orient Paper and Industries
Cement expansion formalized; 6% dilution on the cards
Orient has formalized its expansion plans in Cement via a 3m-ton
greenfield plant in Karnataka for `17.2bn. It will issue 12m
warrants, convertible into equity shares at `57.25 to the promoter
(leading to dilution of 6%), to part fund the project. Maintain Buy.
Cement expansion formalized. Orient has formalized its plans of
expansion in Cement by announcing a greenfield project. The
Board, at its meeting on 4 February, approved setting up of 3m-ton
cement plant in Gulbarga district of Karnataka. The company has
completed the limestone prospecting study and is in possession of
half the required land. The project involves 50MW of power plant,
of which 25MW is planned to be sold on merchant basis.
Project funding. The project is expected to cost `17.2bn (of which
`14.7bn is for Cement). The equipment is likely to be ordered by
2QFY12 and the commissioning time is estimated to be 2QFY15.
Funding would be done at a debt-equity ratio of 1:1. The company
plans to part fund the equity component through a `687m warrant
issue to the promoters. It will issue 12m shares at `57.25/share.
EGM to seek shareholders approval is slated for 7 March. Of the
issue amount, 25% requires to be upfront payment, with the
remaining to be paid within 18 months.
Our view. We see the decision to expand in Cement as positive,
given the division’s better outlook and high ROCE vs. other
businesses of Paper and Electricals. A 6% dilution would enable the
promoter to raise their stake by 3.4% (paying 15% premium to
market price) and help keep net leverage lower than 0.7x (0.6x now).
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