Promoters of FMCG major Emami Ltd have raised Rs 1,600 crore by offloading a 10 per cent stake in the company in a bid to cut their personal debt taken by the pledge of shares.
The Agarwal and the Goenka families, who jointly own 72.74 per cent in Emami, on Monday sold 4.5 crore shares at Rs 355 apiece to a clutch of mutual funds and private equity players.
SBI Mutual Fund scooped up a majority of shares, worth around Rs 722 crore, while Pioneer Investment Fund of Amundi and PremjiInvest’s PI Opportunities Fund picked up shares worth Rs 399 crore and Rs 199 crore, respectively.
“We offloaded the shares at the market price, without any discount which is usually associated with such large offerings. This underlines investors’ confidence in Emami,” Mohan Goenka, director of the company, said.
A statement to stock exchanges said promoters holding will be 62.74 per cent after the sale and will reduce promoter debt, which was used in assets such as cement and solar power.
“We do not anticipate further dilution in the future,” Goenka said in a statement to the exchanges.
A scan of the stock exchange filings by Emami showed 47.58 per cent of the promoter holding is pledged.
Promoters are estimated to have raised around Rs 4,000 crore by pledging their holding in Emami Ltd to various institutions, especially to a clutch of mutual funds.
Majority of the money was used to expand the cement business where Rs 1,300 crore was invested.
Moreover, agrotech, paper, healthcare, solar power, real estate soaked up the rest of the funds raised by the promoters by pledging their most valuable asset, the listed shares of Emami Ltd, as collateral.
Sources said promoters could bring down the pledged shares by 4-5 per cent immediately and then engage in talks to cut it by another 10 per cent.
One option before the promoters was to monetise Emami Cement via an initial public offer. Though it has filed an application before Sebi to raise up to Rs 1,000 crore, launching the IPO is still several months away.
Meanwhile, a savage correction in mid-cap stocks and a lacklustre performance of Emami’s core FMCG business have put pressure on the share price, reducing the value of the collateral asset against which the loan was sanctioned.
From a 52-week high of Rs 602, the Emami Ltd stock has slid to Rs 355 on Monday. It is not known if some of the pledged shareowners were asking for the early repayment of loan seeing the value erosion.
Industry observers said the current environment where several promoters are facing investors’ ire over pledged shares may have prompted the Emami owners to take the pre-emptive steps before it was too late.
For instance, Anil Ambani’s ADAG group firms said L&T Finance and Edelweiss sold pledged shares ‘illegally’ leading to erosion of market cap, a charge contested by both. Moreover, Eveready promoters are trying to sell battery business to cut group debt.
