Cancelled Fund-Raise Won’t Hurt Debt Repaying Ability, Says Vascon Engineers
Construction engineering firm Vascon Engineers Ltd.’s stock ended at the 20 percent lower circuit on Monday after the company cancelled the proposed preferential allotment of fully convertible debentures.
The company’s board had in April approved a proposal to issue compulsorily convertible debentures for up to Rs 110 crore through a private placement to Manan Finserve Private Ltd. and Vinca Rosea Farms and Properties LLP. The debentures were to be issued at a face value of Rs 1,000 each and were to be converted to equity shares at the end of 18 months or earlier.
Differences in strategy in terms of real estate development and unlocking value of existing assets led to termination of the deal, R Vasudevan, chairman and managing director of the company, said in a conference call. “This event would be a temporary blip since the company was prepared to get in Rs 110 crore and made plans to utilize funds immediately. This would, however, not limit our debt paying capability. So, no debt default risk seen.”
Highlights of the concall with Vasudevan:
- The company has raised Rs 200 crore in the last two years by rights issue, monetisation of non-core assets and income tax refund.
- This investment would have brought a capital of Rs 110 crore for the company which would have been used for debt repayment and to fund the existing real estate projects.
- Do not see much impact on profit since the debentures also had an interest component for 18 months.
- The company will continue monetising rest of the identified assets, including land in Aurangabad, a stake in a hotel in Goa, a few flats in Nashik, commercial property in Andheri.