IL&FS Engineering locked in UC

Shares of Hyderabad-based IL&FS Engineering and Construction Company are locked in upper circuit, trading higher by 9.94% at Rs. 37.60 per share, as the company’s board had approved a rights issue of upto Rs. 300 crore. Since the time of announcement of company’s board meeting to consider a rights issue, on 4^th October 2013, share price has risen close to 32%!

Subject to regulatory approvals, price of the rights issue is indicated at 7.5% less than the closing price on NSE on 9^th October 2013 i.e. price of close to Rs. 31.64 per share. The rights entitlement ratio, exact issue size, record date and issue timing is yet to be announced. An EGM is scheduled for 11^th November to seek shareholder approval to increase company’s authorized capital to facilitate the rights issue.

Earlier this month, it had extended redemption of preference shares worth about Rs. 400 crore by 6 years. Rs. 300 crore is a material size for the rights issue as the company’s current market cap (after 10% rise today) stands at Rs. 337 crore. What remains to be seen is the participation of existing holders in the rights issue. Shareholding pattern as of 30^th September 2013 shows that IL&FS Financial Services holds 29.78% (of which 50% encumbered) as promoters, Saudi’s SBG Projects holds 27.91%, institutional investors hold 17.31% with balance 25% by retail public.