Sterlite Industries tumbled 6% on Friday after the company announced its decision to raise up to $500 million or Rs,2,300 crore by issuing convertible senior notes that are convertible into American depository shares (ADS) at an initial conversion price of $23.33 per share, a 26 percent premium to their closing price on Wednesday in New York. The issue would result in about 12.75% equity dilution.
The notes bear a coupon of 4 percent and will mature on Oct 30, 2014, the non-ferrous metals producer said in a statement. Deutsche Bank Securities Inc. and Morgan Stanley & Co. are acting as joint book runners for the offering. The offering is expected to settle on Oct 29.
Sterlite intends to use the net proceeds from the offering for expansion of its copper business with allied power plant and acquisition of complementary businesses outside of India. The company said it would set up a 400-kpa brownfield copper smelter expansion project at Tuticorin in India, which will double its copper-smelting capacity to 8 lakh tonnes.
Post this expansion, the facility would be one of the largest single location custom copper smelters in the world, Sterlite said. The new smelter will utilize the ISA Smelt technology currently used at Tuticorin.
The project, which will be funded through a mix of debt and internal accruals, also includes a refinery and other associated facilities such as a sulphuric acid plant and a phosphoric acid plant.
Besides, the company plans to set up a 160- megawatt captive power plant at the site. The project is expected to be commissioned by mid-calendar year 2011.
The latest announcement for fund-raising is the second such instance in recent times. In July, it raised $1.6 billion through issue of American depository shares at a price of $12.15 per ADS for the further development of its power business in India, as well as for capital expenditures and potential acquisitions.
On the BSE, Sterlite Industries is now trading at Rs.816, down 6% on a volume of 13.16 lakh shares. Earlier in the day, the stock plunged as much as 9% to Rs.790. On the New York Stock Exchange, the company's American depository share ended down over 10% at $16.62 overnight. Each ADS is equal to one underlying equity share.
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