Indian Hotels modifies rights, to issue 6% NCDs of Rs 100 each

MUMBAI: Indian Hotels, owners of the Taj brand of resorts and palaces, on Thursday announced its decision to modify its proposed rights issue from fully-convertible debentures (FCDs) to non-convertible debentures (NCDs). In place of its proposed issue of 4% FCDs, announced earlier, it now proposes to make a rights issue of 6% NCDs of Rs 100 each IN the ratio of 1 NCD for every 10 equity shares.

The company will make two simultaneous, but unlinked rights issues, to finance its expansion in India and abroad. It will raise Rs 844 crore through the rights issue and Rs 600 crore through an issue of debentures.

Each NCD will have a detachable warrant, which can be converted into an equity share at Rs 130 to Rs 150 per share. These rights should be exercised within 12 months of allotment. The price and the period of the warrants will be fixed at the time of its actual issue.

The NCDs, with a maturity of three years, would raise Rs 600 crore and another Rs 780-900 crore (depending on the price to be fixed) would be raised when the warrants are exercised. The increase in capital from this modified instrument would be Rs 6 crore as proposed earlier, the statement said.

There will be no change in the rights issue of equity shares offered to shareholders in the ratio of 1:5 at Rs 70 per share (of Re 1 each). This issue will increase the equity capital by Rs 12.06 crore (over the current capital of Rs 60.29 crore) and will raise Rs 844 crore.

The company is pursuing an aggressive growth strategy, both in the domestic and international markets. The objective of the two issues is to meet the company’s long-term financing needs for capital expenditure and growth plans, including possible acquisitions. While Indian Hotel has earmarked around Rs 1,200 crore for expansion, both in India and overseas, its focus will continue to be in the luxury segment.

After having a significant presence in the US through Pierre in New York, Ritz Carlton in Boston and Campton Place in San Francisco, the Indian hotel major is now looking to grow in Europe, China and the Far East through acquisitions, say company officials. The company reported a turnover of Rs 364 crore for the quarter ended June 30, 2007, up 22% over the corresponding quarter of the previous year.

It posted a net profit of Rs 55 crore, up 39%, during the period. Early this month, the company decided to bring down the limit of FII holding in the company from 40% to 30%. FIIs currently hold 23.4% and the promoters 29%.