Shree Cement Ltd, India’s third largest cement maker, is at an advanced stage of raising more than ₹2,000 crore through a qualified institutional placement (QIP) offering, two people aware of the development said.
“The money will be used for capex and debt reduction. They have been meeting investors for this purpose and are targeting to close this fundraise within this quarter," said one of the two people cited above. “They could raise anywhere between ₹2000- ₹3000 crore depending on demand from investors."
Shree Cement has hired JM Financial and ICICI Securities as advisers to manage the QIP, the people said, requesting anonymity. QIP is a tool, through which listed companies can sell shares, debentures, or any securities, other than warrants that are convertible into stocks, to a qualified institutional buyer.
While e-mails written to Shree Cement and JM Financial remained unanswered, ICICI Securities declined to comment on the matter.
Cement producers in the country have been hit by a prolonged monsoon season and falling cement prices amid an ongoing demand slump. While other large cement producers such as UltraTech Cement Ltd, ACC Ltd and Ambuja Cements Ltd saw their sales volume decline in the September quarter, Shree Cement was an exception.
In the quarter ended 30 September, the Rajasthan-based cement maker’s sales volume grew marginally at 1.5% to 5.72 million tonnes and net realizations rose 9% to ₹4,654 per tonne from a year earlier. The company’s profit also rose over five times to ₹309 crore, compared to the corresponding quarter in the previous fiscal.
On 19 October, the company’s board had said that it planned to raise as much as ₹3,000 crore equity, in one or more tranches, through QIPs. It planned to use these funds for inorganic growth opportunities that may come up over the next 12-18 months, according to a 22 October note by HDFC Securities.
“Markets have done well recently and we have seen a few QIPs getting closed with Bajaj Finance raising almost $1.2 billion. In this environment, companies are eager to re-look at equity deals and we may see some more QIPs hitting the market," said the first person.
As of October, five companies have raised ₹17,930 crore via QIPs, exceeding the ₹10,489 crore raised by 13 firms in the entire fiscal year 2018, according to primary market tracker Prime Database.
Recently, consumer lending firm Bajaj Finance Ltd mopped up ₹8,500 crore through private placements to qualified institutional investors. Subscribed over five times its size, the QIP got interest from foreign institutional investors including BlackRock, Nomura and Singapore’s sovereign wealth fund.
In September, private sector lender Axis Bank Ltd raised ₹12,500 crore in India’s second-largest QIP from domestic institutions and large foreign investors, including GIC, Goldman Sachs, Fidelity, Nomura and American investors T Rowe Price and BlackRock. In August, another private lender, Yes Bank Ltd also raised ₹1,930.46 crore through a QIP.