UltraTech begins debt revamp

UltraTech begins debt revamp
Published: 19 October 2004

Ultratech Cement, a subsidiary of Grasim Industries, has begun its much-touted debt restructuring programme and has already reduced its debt burden to Rs 1,550 crore, from Rs 1,800 crore when it acquired the cement unit from L&T.

A Birla group top executive said the company is also planning a private-placed debenture issue aimed at institutional investors to reduce the liabilities.

He stated that the proposal is in the initial stages and will be placed before the board of directors. He added that no final decision has been taken on the size of the issue.

"As of date, we have an outstanding debt burden of Rs 1,550 crore," said a company official, adding that this is slightly lower than the liabilities when Grasim had acquired the cement division from L&T.

"We do not have any plans to increase the borrowing limits currently set with bankers and financial institutions. There are term loans contracted at rates as high 12-13% and negotiations are progressing with bankers to reduce these rates.

Today, we can raise money from the debt market at rates hovering around 6.25%," said a company executive.

"We are also discussing with various lenders for liquidating some of the liabilities which will reduce the debt burden considerably," he added.

"We have set an internal target to bring down the debt-to-equity ratio to 1.1% by next year," the executive added. When queried on any merger plans with Grasim, the official said that there are no such plans in the near future and both the entities will be maintained as separate entities.

High cost of funds have taken a toll on the financials of the company as is evident from the fact that despite a topline of Rs 2,705 crore, as on March 31, ’04, the net profits amounted to just Rs 38.8 crore. The company’s operating margins too were pegged at a modest 16% as against 28% for its parent Grasim Industries.