Mumbai: The board of Reliance Infrastructure Ltd, or R-Infra, has approved a proposal paving the way for a capital infusion of Rs4,300 crore by its promoters, boosting the net worth of India’s second largest utility firm and reinforcing its ability to borrow money for projects.
In a statement on Sunday, shortly after a board meeting, the firm said that it approved the issue of warrants to the promoters, the Reliance-Anil Dhirubhai Ambani Group (R-Adag), at around Rs1,000 each. The price is 11% below the stock’s closing price on Friday. The warrants will be converted into 42.9 million shares later, it said.
Institutional investors such as Life Insurance Corp. of India and other insurers, which “have been long-term shareholders” and collectively hold a stake of about 20%, “will be provided an opportunity to participate in the proposed offering, on the same terms and conditions”, the statement said.
The capital infusion will bolster R-Infra’s net worth by 34% to Rs16,000 crore and its borrowing ability by one-third, from Rs24,000 crore to Rs32,000 crore.
“We have a great sense of excitement at the unprecedented opportunities unfolding before Reliance Infrastructure, in high growth areas of power and infrastructure development,” R-Infra chairman Anil Ambani said in the statement. The capital market regulator requires the promoters to pay R-Infra 25% of the total investment, or Rs1,075 crore, and the rest at the time of conversion. The board also approved cancellation of 43 million share warrants that were issued to Ambani and his associate companies, collectively called the promoter group, in January 2008 at a price of Rs1,822. The warrants, with a deadline of 19 July this year, would have required a total infusion of Rs7,835 crore.
Mint reported last week that R-Infra promoters were unlikely to convert the earlier warrants as they were at a considerable premium over the prevailing market rates; the new equity placement proposal at a reduced price would result in substantial savings.