Mumbai:Metals producer Sterlite Industries raised about $1.5 billion through the sale of American Depositary Shares (ADS), the largest US share sale from India in two years, to develop its power generation business and fund acquisitions.
The US offering was priced at $12.15 each, Sterlite said on Thursday, a discount of 6% to Wednesday’s closing price for Sterlite in the United States and one cent higher than the minimum price of $12.14 set by Sterlite.
London-listed parent Vedanta bought $500 million of the issue, lifting its stake in Sterlite to 57.5%.
Sterlite, which is India’s largest non-ferrous metals and mining company, will use the proceeds to develop its power generation business in India, as well as for capital expenditure and for planned acquisitions, the company said.
The deal comes amid a flurry of planned capital-raising by Indian power companies looking to fund expansion to meet an acute electricity shortage in Asia’s third-largest economy.
Adani Power plans to raise as much as $600 million in an IPO set to launch later this month, sources said, while Indiabulls Power Ltd, a unit of Indiabulls Real Estate, said it had filed a draft prospectus for a listing that media reports have said could raise about $310 million.
State-run power firm NHPC Ltd said on Thursday it plans to launch an IPO on 7 August. The company scrapped plans last year to raise about $700 million, banking sources have said.
India has seen a wave of capital-raisings by companies taking advantage of a 77% surge in the benchmark stock index since early March.
Funds for Capex , M&A
Pawan Burde, senior research analyst with Angel Broking, said Sterlite had very ambitious expansion plans and needed a lot of money.
“They are going in for quality expansion. Raising funds should not be a problem for them as they have one of the lowest production costs, and they were able to maintain margins even when aluminium prices were low,” he said.
Its unit Sterlite Energy is investing Rs82 billion ($1.7 billion) to build a 2,400 megawatt thermal coal-based power facility in the eastern state of Orissa. The project is expected to be commissioned in the third quarter of fiscal year 2010, which will end in March, the company said in its filing.
Sterlite’s Indian shares were trading down 8.3% at Rs576.50 by 0811 GMT in a subdued Mumbai market that was down 0.3%. Each ADS represents one equity share.
The ADS sale is the biggest from India since ICICI Bank raised $2.46 billion in June 2007, according to Reuters data. Earlier the same month, Sterlite raised about $2 billion in an ADS offering.
At the end of March, Sterlite had cash and short-term investment reserves of $3.96 billion.
Sterlite is a majority owner of former state-run Hindustan Zinc, which has a 79% market share of the Indian zinc market. Sterlite plans to buy the remaining government stake.
Sterlite has also agreed to pay $1.87 billion for US copper miner Asarco, which has estimated reserves of 5.2 million tonnes.
The company is also expanding its aluminium business through Vedanta Aluminium, a unit of Vedanta Resources, it said. It currently has a capacity of 1 million tonnes per annum, expandable to 1.4 million tonnes. That will be further expanded to 5 million tonnes by mid-2011, it said.
Sterlite’s ADS sale was handled by JPMorgan and Morgan Stanley, who have an overallotment option equivalent to 15% of the offering size. Last month, Sterlite obtained shareholder approval to raise funds through issue of securities.