Hindustan Copper has announced that it might look at the QIP route to issue fresh equity. Speaking to CNBC-TV18, CMD of the company, Shakeel Ahmed said that delaying the FPO has opened up new options to raise funds for the company.
"Improved financials of the company has ensured enough cash-flow to fund expansion plans till end of FY13," he said. "Therefore, we would be requiring funds only in FY14, which gives us enough time to explore other options,” Ahmed said, explaing the delay in FPO.
The stock price of Hindustan Copper has tanked around 40% since the announcement of the FPO and currently trades at Rs 277.55, with an earnings per share (EPS) value of Rs 2.24.
Below is the verbatim transcript of Ahmed's interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video.
Q: Could you start off by first confirming for us whether or not the FPO will happen or whether some other option will be looked at such as the government divesting and there is no fresh equity sale?
A: As on date the position is that cabinet committee on the economic affairs has approved 10% fresh equity and 10% disinvestment. There has been some delay and we have made use of this delay to consider other options to finance our mining expansion projects.
In addition to FPO, these options include ECB and a joint venture with Nalco. There is no finality on this account as yet. As and when we take a final call we will share with you.
Q: What made you reconsider the FPO in the first place?
A: The prime reason was our improved financials. When we started the process our cash in reserve was quite low, about Rs 100-150 crore. Today we are sitting at Rs 450 crore.
So, we did a quick rework of our fund requirement and we discovered that in view of improved cash reserve and expected buoyancy in copper prices, we do not require funds for expansion in the next two years that’s means FY12 and FY13.
Our gap is only in FY14. So it’s not fair on our part to immediately raise the money and not use it. But as I mentioned earlier it’s not a final decision. We are still working on it and any decision will be taken by the cabinet.
Also Read: Hindustan Copper aims to maintain 9-10% production growth next year
Q: Your decision would not have been in part because of a request from the government suggesting that they are finding it difficult in the current market conditions to push through a lot of FPO and therefore they should do their tranche only while you don’t do the capital raising through an FPO?
A: We certainly take several factors into consideration before arriving at such decisions. All you can say is, our expectation is that when we are ahead with our various expansion projects it will certainly get us a better value for our valuations than what it will as on date. So yes, it’s one of the factors.
Q: Has there been any indication to the tune that now that the FPO isn’t happening you are free to look at other options in terms of funding or raising capital?
A: Let me clarify it is not true at this stage to say that the FPO is not happening. All that I said was there was some relook at the fresh equity part of it. As on date we have certain vacancies of independent directors which is coming in way of going ahead with FPO even if somebody want to go ahead with that including department of disinvestment. So, it will take a little while before FPO can go through even if somebody takes a decision today to immediately go through it.
