Debt restructuring and the extraordinary demand generated from reconstruction of the tsunami-affected states of Tamil Nadu and Andhra Pradesh should result in better realisation for India Cements, said Khandwala Securities, a Mumbai-based brokerage, in a new report. While cement companies are largely expected to be gainers from the reconstruction of the affected areas, India Cements could stand to gain the most on account of its solid reach in these markets.
Last month, the company had announced plans to raise close to US$170m through debentures and warrants primarily issued to bring down its debt levels. The debentures and warrants will be placed with funds managed by Asia Debt Management Hong Kong Ltd, a foreign investor, through their FII accounts.
The first half of this financial year was a disappointment for the entire cement industry with the southern markets faltering. Cement manufacturers expect the scenario to improve in the second half of this financial year translating into a growth rate of around 8 per cent for the industry.
India Cements, which has a capacity of close to 9 million tonnes in units spread over Tamil Nadu and Andhra Pradesh, had earlier taken an aggressive route to grow in the domestic cement industry through acquisitions. However, these moves led to soaring debt levels, which had an impact on the company’s balancesheet. It had to subsequently take up restructuring measures that included divestment of its two cement units, Raasi Cement and Vishaka Cement.
In a restructuring move, the company had planned to bring down the size of its workforce and reduce debt liability through sale of assets. The restructuring package, the implementation of which was monitored by IDBI, provided exit options for secured and unsecured lenders.