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Promoters of Emami Ltd – the Goenka and Agarwal families – have sold off 10 per cent of their stake in the group FMCG entity, Emami Ltd, thereby, raising ₹1,600 crore. The proceeds will be used to pare the Group’s debt.
The stake sale was executed through the stock exchanges and the purchasers included SBI Mutual Funds, Premji Invest, Amundi, IDFC and L&T Mutual Fund.
Post the stake sale, the promoter holding in Emami Ltd stands at 62.74 per cent, the company said in a statement.
Pledged shares
Sources say the move is also likely to bring down pledged shares. Promoters’ pledged shares are to the tune of 48 per cent as on Q3FY19. And, this was a concern.
According to Abneesh Ray, Research Analyst at Edelweiss Securities, the promoters pledged share rose from around 44 per cent in the July-September period (Q2 FY19).
“This money (₹1,600 crore) will be used to reduce pledged shares and de-leverage debt at a promoter level. Although the deal has been done at a low price, we believe this will reduce promoter debt level concerns,” he said, adding that a deal with a leading PE player is also being “parallely worked upon”.
Reducing debt burden
According to Mohan Goenka, Director, Emami Ltd, the stake sale will improve the liquidity position of the promoter group and “reduce debt”. No further dilution is expected.
“We are committed to maintaining our significant majority stake and the company does not anticipate any further dilution in stake in the foreseeable future,” he said.
The debt, company sources said, was incurred in creation of assets such as cement and solar power. Emami Ltd, sources said, has a debt burden of around ₹ 118-120 crore till FY18-end. However, capital intensive businesses like Emami Cement and its hospital chain, AMRI, have high debt.
Ratings agencies have claimed that Emami Cement – whose IPO plans are on – have a debt burden of over ₹2,100 crore; while in case of AMRI the promoter group (Emami) has demonstrated tangible support and infused unsecured loans of ₹320 crore in FY18 (₹300 crore in FY17; and ₹280 crore in FY16).
“In FY18, AMRI availed term loans backed by corporate guarantees to adjust its cash flow mismatches along with its capex. Considering the proposed ₹200-crore capex in the next two years, Ind-Ra (India Ratings & Research) expects AMRI’s liquidity to remain stretched,” the agency said.
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