VBC Ferro Alloys is planning to come out with a rights issue to fund its expansion plans, which include setting up of a 120-MW coal-based captive power plant and increase the capacity of its ferro alloy unit in Adilabad district in Andhra Pradesh.

The company has also sought its shareholders approval to permit the board of directors to borrow up to Rs 1,000 crore, as part of its fund-raising initiatives.

An AGM of the company held here on Monday passed resolutions to these effects, amidst loud protests from some minority shareholders who felt that the company's borrowing plans were not in tune with its net worth. Groups of shareholders had a bitter altercation outside the venue of the meeting.

Its shares slid Rs 8.15 (3.95 per cent) on Monday on BSE, closing at Rs 198.40 against the previous close of Rs 206.55.

The company maintained that with power costs accounting for 40 per cent of the production costs, it was vital to set up the power plant for improvement of the operational and financial performance of the company.

Mr M.V.V.S. Murthi, the company's chairman, said the company had obtained coal linkages for the project and expects to complete financial closure by end of 2011. It will be investing Rs 632 crore for the power unit. The company also plans to add three furnaces to its ferro alloy unit with a rated capacity of nine MVA each.

Konaseema Gas Power Ltd, in which VBC Ferro Alloys has a major investment of equity, had incurred a net loss of Rs 57 crore in its first year of operation, which started in June last year. Notwithstanding the net loss, KGPL earned a cash profit of Rs 30.90 crore in 2010-11.

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