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ACC to make 4:1 rights issue at Rs 55, takes fresh guard to cement long innings

The board of directors of Associated Cement Companies Limited today announced sub-division of equity share value at Rs 10 each from existing face value of Rs 100 each.

According to a company release, ACC will shortly make a rights issue of equity shares to the existing shareholders of the company in the ratio of one rights share for every four shares held at a price of Rs 55 per share at a premium of Rs 45 per share on the sub-divided share of the face value of Rs 10 each.

The issue price represents a discount of around 35 per cent to the current market price of the company's share as quoted on the stock exchange. The rights issue will increase the company's equity share capital by only 25 per cent from the present level of Rs 1.37 billion to Rs 1.71 billion and would provide equity funds of Rs 1.89 billion to the company.

Considering the procedure involved for a rights issue, the increase in capital would be effective only during the company's financial year 1999-2000.

The board of directors of ACC also proposed to make a preferential offer of naked warrants/equity shares to the present promoter group. To wit, Tata companies (mainly Tata Sons Limited and other existing Tata shareholding companies).

This preferential issue will be made in accordance with the relevant SEBI's guidelines and will be structured so as to enable the Tata group to increase its shareholding in ACC to around 20 per cent when the warrant/equity shares are exercised/issued.

On the basis of the present share capital of ACC (before the rights issue) it is proposed that the Tata companies would be issued upto nine million naked warrants/equity shares and, according to the relevant SEBI pricing formula (the average of the market prices over the last six months), the price would presently work out to about Rs 110 per share of the face value of Rs 10 each on a cum-rights basis.

These figures would need to be adjusted appropriately for the sub-division of shares and also if the warrants/equity shares are exercised/allotted on an ex-rights basis, but without affecting the ultimate percentage holding of Tatas and the total amount of funds involved.

When the warrants/equity shares are exercised/allotted, ACC would receive additional equity funds of upto Rs 1 billion and ACC's equity capital would increase only by about six per cent after rights issue to a total level of about Rs 1.81 billion.

It will be observed that the proposed two issues of equity capital will increase ACC's equity capital by only about 31 per cent in two stages while providing ACC with an additional equity funds of Rs 2.89 billion for its development plans and for strenghthening its capital structure. These proposals will be subject to all such approvals as may be required including approvals from the financial institutions like the UTI, LIC, GIC and IDBI, SEBI and the shareholders of the company, the company release stated.

The company's annual general meeting would be held in Bombay on January 7, 1999 for the ratification of present proposals.

The board took stock of the company's growth plans, acquisitions, expansion and modernisation schemes. Despite the economic slowdown, it is necessary for the long-term future of the company to proceed with development plans, it felt.

The board discussed acquisition of cement plants, expansion and modernisation of the existing ACC plants over the next two years. This strategy is considered necessary to maintain ACC's leadership position in the cement industry.

For capital requirements, the board considered a judicious combination of additional equity and long-term debt to supplement internal resources so that the overall debt/equity ratio of the company remains within a prudent level.

UNI

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