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Mumbai Jan. 1 FMCG major Godrej Consumer Products Ltd (GCPL) is coming out with a rights issue to raise a maximum of Rs 400 crore to part-finance its expansion plans and acquisitions, apart from repayment of certain debt.

The company has filed a draft letter of offer with SEBI and after the market regulator gives its nod, it will decide on the issue price and ratio of the rights offer.

A bulk of the proceeds from the issue will be utilised to part-finance its Rs 144.50 capital expenditure programme, which includes plans to set up an additional facility consisting of chemical and soap plants at Baddi in Himachal Pradesh.

“We intend to utilise Rs 113.50 crore out of the issue proceeds for this and the balance amount of Rs 31 crore out of our internal accruals. We currently intend to make the new facility operational by March 2010,” the company said in its draft letter of offer.

The chemical plant would require between 18 and 24 months for completion, while the soap unit would require about 12 months.

A part of the proceeds of the issue will also be utilised to invest in the company’s joint venture, Godrej SCA Hygiene Ltd, which manufacturers and markets paper-based absorbent hygiene products.

“We intend to use Rs 20.50 crore of the net proceeds as a part of our capital contribution in the joint venture,” the company said.

Godrej SCA Hygiene is planning to build a manufacturing facility at Sinnar in Nashik to start the manufacture of paper-based absorbent products at an estimated cost of Rs 41 crore.

Part of the proceeds will also be used to repay certain debt. As on September 30, 2007, on a standalone basis, the company has secured loans outstanding of Rs 37 crore and unsecured loans outstanding of Rs 82 crore as part of its loan portfolio.

“In order to enhance out net worth, reduce leverage and allow flexibility in financial management, we intend to utilise up to Rs 84 crore of the net proceeds towards prepayment/ repayment of a portion of our debt,” the company said.

The company is looking at widening its reach through strategic acquisitions both in India as well as overseas.

“While we explore various inorganic growth opportunities in areas of personal and household care, we are currently evaluating specific opportunities in the hair care category, which are at various stages of negotiations. The proceeds allocated towards acquisition may not be the total value of the acquisition, but may provide us with leverage to enter into a binding agreement,” it said.

The company’s brand portfolio includes Cinthol, Ezee, Godrej Shikakai, ColourSoft and Godrej No 1.

The Indian FMCG sector is estimated to have a market size of about $17 billion, which may increase to $33 billion by 2015.

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