The Wheels India stock has gone through a summersault. The company went in for a rights issue in February, which was offered at a 50 percent discount to the market price at that time. Srivats Ram, MD, Wheels India says the intention was not just to follow Sebi guidelines on promoter holding. At present, promoters hold 75 percent shares, while the rest is held by public shareholders.
Also Read: Tata Motors to invest Rs 1,500 cr on new trucks, buses
He says the main aim of the company was to reduce debt and to bring down the debt/equity ratio to 1:1. The company raised Rs 86.51 crore via the rights issue.
Ram expects to see growth in FY15 after almost two years of degrowth. The company's FY14 topline has slumped 6.5 percent due to sluggish growth in the commercial vehicle segment. However, he believes that the CV industry has bottomed out.
Below is the interview of Srivats Ram with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: Was the purpose of public issue only to bring down the promoter interest to 75 percent. What does the promoter shareholdings stand at now, what is the minority shareholding?
A: We went ahead with the rights issue to the non promoter shareholder. As a result of the right issue the public shareholding is now 25 percent, the promoter shareholding is 75 percent but other than purely meeting the Sebi guidelines the purpose behind the rights issue was to reduce the debt. The company had debt equity closer to 1.5 and we wanted to bring it closer to 1:1, so it is debt reduction that we are looking at.
Sonia: How much did you raise from this rights issue and how much have you brought down your debt in the absolute amount?
A: The rights share that we issued is 21.62 lakh shares which raised about Rs 86.51 crore and this entire amount will be going towards debt reduction.
Latha: What does the debt come down to?
A: As a result of this, as on March 31, I expect it to come down to 1:1.
Sonia: Do you plan to raise any more fresh capital hereon?
A: Not in the immediate period.
Sonia: Any outlook on your business, how it is shaping up?
A: In terms of topline as the automotive industry has been very muted and negative on the commercial vehicle. For the company per se the sales has gone down by 6.5 percent so if you look at it over two year period – there has been drop in sales of about 14 percent but the positive part of it is that we seen that the bottom of the market has already shown, so we are now seeing things probably not necessarily improving but definitely not worsening and we see growth in the coming year.
Latha: Do you flatten out in the current year; you make Rs 2000 crore, is that how we should assume FY14?
A: We will end FY14 at around Rs 1,806-1,810 crore
Latha: And in FY15?
A: We see growth in FY15. It is not going to be a terrific growth, I think after the elections we will have better idea but we are definitely seeing growth.
Stay tuned for more...
Wheels stock price
On February 24, 2014, Wheels India closed at Rs 627.40, down Rs 21.2, or 3.27 percent. The 52-week high of the share was Rs 749.65 and the 52-week low was Rs 321.48.
The company's trailing 12-month (TTM) EPS was at Rs 20.76 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 30.22. The latest book value of the company is Rs 287.03 per share. At current value, the price-to-book value of the company is 2.19.
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