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Two-stage L&T plan to raise funds

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  • Published 11.06.14

Mumbai, June 10: Larsen & Toubro (L&T) today sought shareholder approval to raise up to Rs 3,600 crore ($600 million) through the sale of shares to institutions.

The engineering and construction giant also plans to mobilise up to Rs 6,000 crore via debentures in this fiscal.

The company is seeking shareholder approval through a postal ballot for both the proposals.

L&T, which recently surprised the Street by posting better than expected numbers for the fourth quarter, told shareholders it needed capital for growing business. Internal generation of funds will partially meet the need, while debt-raising will be an option in addition to the sale of shares.

“It is thought prudent for the company to have enabling approvals to raise a part of the funding requirements for the said purpose,” it said in a notice sent to shareholders.

L&T said the fund raising might be done through a mix of equity or equity related instruments. It may also opt for a QIP issue which will be less time consuming and more economical than other modes of raising capital.

The company said that its businesses, which includes heavy engineering and infrastructure projects, require sizeable investments and continuous expenditure, thereby prompting it to raise up to Rs 6,000 crore through the issue of debentures.

L&T is one among a number of companies who are interested in QIPs.

Reliance Communications Ltd (R-Com) is also mulling a QIP issue to raise up to $300 million, sources said. However, details could not be verified.

With foreign institutional investors (FIIs) showing strong interest in equities and the market flooded with liquidity, experts say more QIP issues are expected in the coming months.

The rising popularity of QIPs so far this fiscal is in contrast to the situation in the last financial year.

According to capital market tracker Prime Database, companies raised Rs 9,402 crore through QIPs in 2013-14, a fall of 13 per cent over the previous financial year. In 2009-10, companies raised a record Rs 43,968 crore.

Other companies that have come out with QIP issues include Yes Bank and Idea Cellular.

Yes Bank raised Rs 3,000 crore with a large part of the interest coming from FIIs. Other banks such as the IDBI Bank and Union Bank of India are planning to raise funds through the QIPs.