IRB Infra locked at 10% lower circuit on equity dilution concerns

Shares of IRB Infrastructure Developers (IRB Infra) were locked at the 10 per cent lower circuit at Rs 266 on the BSE in Wednesday’s intra-day trade after the company's board approved fund raising of up to Rs 5,347 crore by issuing 252.45 million equity shares through preferential issue on a private placement basis. The issue price for the preferential allotments is Rs 211.79 per share, a 28 per cent discount to Tuesday’s closing price of Rs 294.40 on the BSE.

Till 10:44 am; a combined 13.3 million shares had changed hands at the counter and there were pending sell orders for around 1.2 million shares on the NSE and BSE, the exchanges data showed. In the past one week, the share price of the roads & highways construction company had outperformed the market by surging 44 per cent, as compared to less than 1 per cent gain in the S&P BSE Sensex. The stock hit a record high of Rs 347 on Monday, October 25, 2021.

IRB Infra has announced two separate equity fundraise through preferential allotments to Cintra, an arm of Spanish infrastructure major Ferrovial and Singapore's GIC. According to the deal details, Cintra would invest equity capital of up to Rs 3,180 crore and will have a maximum stake of 24.9 per cent in IRB post investment.

On the other hand, GIC (through its affiliate) would invest equity capital of up to Rs 2,167 crore into IRB for a maximum stake of up to 16.9 per cent in IRB post investment. The total investment proceeds from these investments will be a maximum of Rs 5,347 crore, making it the biggest equity fundraise by a listed Indian road firm.

The proceeds is likely to be utilised for deleveraging of the corporate level debt ( Rs 3,250 crore), growth capital for current and future opportunities (Rs 1,497 crore) and general corporate purposes (Rs 600 crore).

Virendra D. Mhaiskar, the founder promoter of IRB will continue as the promoter and single largest shareholder post completion of the transactions with an approximate 34 per cent stake and will retain management control of IRB. These equity fundraise will help achieve the twin objectives of deleveraging and access to growth capital to participate in the massive infrastructure development and monetization plan of the Government of India, the company said in a press release.

In the eventuality that IRB is unable to issue shares to both investors concurrently (including due to timing of receipt of regulatory approvals of either investor being longer than the regulatory approvals for the other investor); the total investment would get reduced to Rs 4,307 crore – Rs 4,462 crore. The exact quantum will depend on which investor transaction is completed earlier, the company said.