Piramal Enterprises will raise as much as Rs 7,000 crore over the next few months through QIP and rights issue, Group chairman Ajay Piramal said on Wednesday.
The drugs-to-financial services conglomerate, whose board recently announced Rs 4,996.2 crore qualified institutional placement (QIP), would raise Rs 2,000 crore via rights issue. “The QIP has been raised at a coupon rate of 7.9 percent, which is lower than the rate of debt you would raise today,” said Piramal, who is also the chairman of Shriram Group.
About 90 percent of the rights issue will be underwritten by the promoters and the entire capital would last the company for 3-5 years.
“The Company will issue these CCDs with a face value of Rs 107,600 each, convertible into equity shares of face value Rs 2 each, with a maturity period of 18 months, with an option to the CCD holders to convert all or part of the CCDs held by them into Equity Shares at any time before the maturity date. Each CCD will be convertible into 40 equity shares,” the company added.
The issue is expected to close on October 25, 2017.
Piramal had said it would raise Rs 4,996.20 crore and infuse majority of its funds in financial services including Piramal Finance, Piramal Capital, Corporate finance group and its newly formed Piramal housing finance entity. Some of the funds will also be deployed to its pharmaceutical business into some greenfield and brownfield projects.
The QIP, he said, saw strong investor interest from North America (50 percent), Asia (35 percent) and the rest from European investors.
According to him, it is the largest QIP that any corporate has undertaken, other than a banking institution and also the first time that compulsory convertible debentures (CCD) have been issued as a QIP.
A CCD provides a certain amount of protection to investors as it is a debt for 18 months. So irrespective of the share price, it allows the investor to get an interest return on it. At the same time, if the share price increases, the investor can convert it into equity. For the company, it is also advantageous because this is a significant amount of money.
The Company has approved the conversion price of Rs 2,690 per Equity Share, against the floor price of Rs 2,688.35 which was determined as per the formula prescribed under Regulation 85 of the SEBI Regulations for the CCDs allotted to Eligible QIBs in the issue.
The administrative committee of the company's board of directors has "approved the issue of Confirmation of Allocation Note for allocation of 4,64,330 CCDs (compulsorily convertible debentures)... aggregating to Rs 4,996.2 crore to eligible QIBs (qualified institutional buyers), the company said on Tuesday.