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ICICI Direct Report
The EIH Ltd. board has approved fundraising of Rs 350 crore through rights issue to shore up liquidity and strengthen the balance-sheet in the wake of an uncertain business environment.
The company would issue 5.38 crore shares at Rs 65 per share (including premium of Rs 63 per share).
The rights entitlement ratio has been set at eight shares for every 85 shares held in the company.
While this would lead to equity dilution of 8.6% on a post diluted equity base of 62.5 crore, it would have a positive impact on earning per share given the current lower return on equity of 4.2% for FY22E (due to restricted business) versus average cost of debt of approximately 9.2%.
Assuming debt repayment of Rs 250 crore in the current fiscal, we expect loss of FY21E to get reduced by 9.4%.
For FY22E, we expect earning per share to improve 4.8% to Rs 2.3/share.
Further improved liquidity buffer would place the company in a better position to cope up with the current business uncertainty.
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