Kolkata: India’s largest maker of container glass, Hindustan National Glass and Industries Ltd (HNGI), will sell treasury stocks to have money in hand for overseas acquisitions and to build a factory.
Treasury stocks are shares that are held by the issuing corporation and are available for resale. HNGI’s treasury stocks were created in 2002 when it merged with itself an American company it had bought earlier.
At current market price, the firm’s treasury stocks are worth at least Rs400 crore, according to joint managing director Mukul Somany. HNGI’s shares closed at Rs211.35 each on the Bombay Stock Exchange on Monday.
The trustees holding the shares for the company are planning to sell “some of the treasury stocks”, he said. “We have already spoken to four potential investors and would be speaking to more to place a part of the treasury stock.” HNGI expects to close the sale by April.
HNGI could soon spend up to Rs500 crore for acquisitions abroad; it would have to invest Rs350 crore more to build the new manufacturing facility in Andhra Pradesh.
Currently, the company is eyeing three potential takeover targets in West Asia, North Africa and South-East Asia. “Due diligence of at least one is going to start soon,” Somany said, adding that each of these acquisitions could cost Rs200-350 crore.
Ownership of factories in these regions would enable HNGI to service its international customers better. The company exports to 23 countries in Europe, the US, Africa and Asia, and around 9% of its annual revenue of Rs1,148 crore in fiscal 2009 came from exports.
HNGI is in talks with banks in Singapore to raise money through debt, according to chief financial officer Laxmi Narayan Mandhata. The overseas acquisitions could be made through HNGI’s subsidiary in Singapore, he said.
The firm had Rs113 crore in “cash and cash equivalents” at the end of fiscal 2009, according to its annual report.
The proposed facility in Andhra Pradesh, which would be commissioned in 16-18 months, would have capacity to produce 3.5 million bottles a day. HNGI has already acquired 150 acres for the project, and expects to sign an agreement with the Andhra Pradesh government soon. Construction of the factory is expected to begin in April.
“HNGI, which controls about 65% share of the domestic container glass market, seems to have exhausted scope for expansion at its existing manufacturing facilities,” said Rajesh Agarwal, director of stockbroking firm CD Equisearch Pvt. Ltd.
The company is looking to fund its expansion through a debt-equity mix of 2:1, according to Mandhata.
Meanwhile, a subsidiary of the company, HNG Float Glass Ltd, which is to make glass for use in cars and buildings, would start commercial production soon from its plant in Gujarat. The group has spent around Rs600 crore on building the factory.