Funds to meet capex, debt obligations
Hatsun Agro Product plans to raise Rs 50 crore through a rights issue of equity shares to fund its retail expansion, secure captive power capacity and bring down debt.
The Rs 1,600-crore dairy company based in Chennai has opted to raise funds to strengthen its balance sheet.
Mr R.G. Chandramogan, Managing Director, Hatsun Agro, said the company needs over 30 MW, about five crore units of electricity annually, of power for its milk processing requirements in Tamil Nadu. The company has decided to secure its power availability by taking a 26 per cent stake in wind mill companies to get a captive source of power.
Apart from the prevailing power shortage, the power costs have also gone up to Rs 5.50 a unit from over Rs 4 due to recent hike in tariff. This hike alone adds Rs 7 crore to its power cost, he said. Arriving at an arrangement to source power is more economical than setting up a captive facility which would involve a capital expenditure of over Rs 230 crore.
The rights issue will also fund the nation wide expansion of its Ibaco-chain of exclusive ice-cream parlours. There are over 65-70 outlets now and the chain will grow to over 180 units by March 2013. Ibaco will be present in all the major cities with immediate plans to expand to 250 totally.
The company also hopes to bring down the Rs 300-crore debt. It has plans to halve its debt to take its debt to equity ratio to 1:1.25.
Hatsun Agro is among the market leaders in private dairy business with its product spanning liquid milk under the brand name Arokya; Ice creams under the Arun Ice Creams brand covering ice creams sold in cups, cones and bar forms; and a range of dairy products under the Hatsun range.
Ibaco covering the ice cream parlour range is its second national brand after the Hatsun range which includes ghee, butter, dairy whitener and milk powder. Its flagship brand Arokya milk and Arun Ice Creams are market leaders in the South.