JK Paper will raise Rs 246 crore through a rights issue of 5.86 crore equity shares to part-finance its Rs 1,650-crore expansion in Orissa. The issue will open on August 8 and close on August 23. The company will issue three equity shares for every four held at a price of Rs 42 a share. The company's shares on BSE were up one per cent at Rs 47 on Wednesday.
The company has fixed July 27 as record date for the rights issue. JK Paper had tied up Rs 226 crore through foreign currency convertible bonds, Rs 150 crore.
The new equity issuance (rights and FCCB) will dilute company's equity share capital by 125 per cent and hence fully diluted equity share capital is likely to increase from Rs 78 crore to Rs 175 crore.
Mr Harsh Pati Singhania, Managing Director, JK Paper, said the promoters will subscribe to their entire allotted portion in the rights issue and have an undertaking to buyout the unsubscribe portion, if any, of the rights.
“The rights will be the last leg of funding for the expansion which is expected to be completed by first quarter of FY-13,” he said. Currently, the promoters hold 40 per cent in the company.
The company's debt will increase to Rs 1,256 crore post-expansion from Rs 450 crore currently.
JK Paper's debt equity ratio will be at 1.7:1 after completion of the expansion project.
On the current uncertainty in the capital market, Mr Singhania said he is confident that it will sail through as the rights issue was decided after receiving several request from the existing investors.
The company intends to increase its paper production capacity at the Orissa unit by 1.65 lakh tonnes per annum from 1.25 lakh tonnes currently, install a new fibre line with a capacity to produce about 215,000 tonnes of pulp per annum and set up a captive power generation facility of 55 MW.
The company also has a paper production capacity of 1.39 lakh tonnes in Gujarat. The company commands a market share 28 per cent.