Kesoram Industries has dropped its plan for a preferential allotment of shares within a fortnight of its announcement, instead opting for a rights issue after a group of shareholders said they wanted to participate in the company’s fund-raising programme.

The development signals investor interest to participate in the burgeoning cement sector and the prospect of Kesoram.

The company will now launch a Rs 400-crore rights issue, twice the size envisaged before, to provide ‘‘equal opportunity to all shareholders to participate in the equity raising plan’’.

After the Rs 100-crore preferential allotment was announced on July 21, the company received representations from a cross-section of shareholders, minority as well as promoter group entities.

“In deference to the views expressed by the shareholders of the company, who wanted to participate in a rights issue and equity raise which is non-dilutive, we decided to cancel the preferential allotment,” P. Radhakrishnan, CEO and wholetime director of Kesoram, said this evening.

The board on July 21 had decided to issue shares and warrants, fully convertible to equity after 18 months, to raise Rs 100 crore to promoter group entity Usinara Trading and Services Private Ltd. This was the first instalment of a Rs 600-crore equity raising plan, including a Rs 200-crore rights issue, to reduce the

borrowing burden of the company.

The company said the rights issue, which has now been doubled to Rs 400 crore, will help it to reduce its leverage faster as the quantum of equity will be higher. Moreover, only 25 per cent of the preferential issue was upfront, with the rest to come after 18 months.

It would also make the company’s liquidity position stronger and speed up the chances of a rating upgrade.

The promoters of Kesoram, the flagship of the Basant Kumar Birla group, hold a 45.97 per cent stake in the company. Manjushree Khaitan, the younger daughter of late B.K, is the chairperson of the company.

The promoter shareholders also include Kumar Mangalam Birla, grandson of Basant Kumar Birla and the chairman of Aditya Birla Group. At least two companies, Pilani Investment and Century Textiles, which are under control of Kumar Birla, hold close to a 20 per cent stake in the company.