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BEML’s Rs. 450 cr. follow-on public issue
Staff Correspondent
| Plans Rs. 900 cr. capital expenditure to expand facilities |
Issue opens
on June 27
To foray into contract mining
FUND RAISING: V. RS. Natarajan (right), Chairman and Managing Director, Bharat Earth Movers Limited, with V. Mohan, Director, Defence-BEML, at a press conference in Mumbai on Wednesday to announce the company’s follow-on public offering.
MUMBAI: Bharat Earth Movers Ltd. (BEML) is entering the capital market with its follow-on public offer (FPO) of 49 lakh equity shares of Rs. 10 each at a price to be decided through a 100 per cent book-building process.
The price band will be decided just before the issue opening date, which is on June 27. The issue closes on July 3.
The issue would constitute 11.77 per cent of the fully diluted post-issue paid-up equity capital of the company and post-issue, the government holding in BEML is expected to remain above 51 per cent.
The company has capital expenditure plans of around Rs. 900 crore, of which half (Rs. 450 crore) will be raised by this issue and the balance will come from internal accruals. The proceeds of the issue will utilised for the expansion of the metro coach manufacturing facility in Bangalore (Rs. 214.50 crore), capital expenditure including upgradation of current facilities (Rs. 180 crore), a 5-MW wind mill for captive consumption (Rs. 27 crore), an R&D centre of excellence for metro coaches (Rs. 9 crore) and a voluntary retirement scheme (Rs. 90 crore). The company has also earmarked Rs. 100 crore for foray into contract mining and Rs. 100 crore for setting up exclusive facilities with Apollo Tyres and JK Tyres.
Three segments
Headquartered in Bangalore, BEML deals in three product segments comprising mining and construction equipment, defence products and railway and metro products. It has three facilities in Bangalore, Mysore and Kolar Gold Fields and it recently expanded its range to cover high quality hydraulics, heavy duty diesel engines, welding robots and heavy fabrication jobs. The company also ventured into two new business areas — IT by providing engineering design software solutions and trading for marketing of non-company products, components, aggregates and commodities for domestic and international markets.
Addressing the media here on Wednesday, V. RS. Natarajan, Chairman and Managing Director, BEML, said, “mining and construction is our largest business contributing 60-65 per cent and we are the largest player in equipment for this sector. It has the greatest potential given that the coal industry is opened up to the private sector. We have formed a joint venture with a leading mine operator to take up contract mining in India and a coal operator overseas. This business has been growing at around 20 per cent in the last four years and is likely to see growth of 25-30 per cent in the next 5-10 years.”
In the defence equipment segment, BEML has a presence in all ground support equipment except aircraft and electronics and contributes 30-35 per cent of turnover. In 2006-07, this segment had a turnover of Rs. 743 crore and, according to Mr. Natarajan, this year, it is likely to cross Rs. 1,000 crore. In the railways segment, BEML is setting up a second plant at Kolar Gold Fields, while the Bangalore facility will concentrate on the metro requirements. “We have tied up with a division of Hyundai for technology transfer for $4.4 million for 15 years and a three per cent royalty.”
BEML has set in motion its offshore expansion plans and signed a memorandum of understanding (MoU) to set up a joint venture company in Brazil with Companhia Comercio E Construcoes to make and supply rail wagons and bogies, mining and construction equipment and spares for the Brazilian market. For this foray, the company will invest around Rs. 100 crore. The company had an order book of Rs. 1,200 crore as on March 2007.
For 2005-06, BEML reported sales of Rs. 2,060 crore and for the nine months ended December 2006, sales were at Rs. 1,486 crore.
Mr. Natarajan said, the company had set a sales target of Rs. 5,000 crore by 2013-14 at an estimated growth rate of 12 per cent. “However, in the last four years, sales have gone up by 80 per cent at a CAGR of 18 per cent. We may reach our target of Rs. 5,000 crore sales by 2010-11 itself.”
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