Kinetic Motor has sold a 10% stake to Citicorp Finance. The company will issue non-convertible and fully convertible debentures of up to Rs 94 crore (Rs 940 million) to Citicorp.
Sulajja Motwani, Managing Director of Kinetic Motor says that the new deal with Citicorp Finance keeps them comfortable on all capex requirements for the next two years.
She further says that this is a time for accelerating the product development and getting into launches and increasing promotions and sales.
Excerpts from CNBC-TV18's exclusive interview with Sulajja Motwani:
How much of an equity dilution does this stake-sell lead for you?
As a result of the equity conversion, which is a part of the entire deal, Citibank would get about 10.37% stake. The promoter's shareholding from a current shareholding of about 62% will come down to around 51%.
Could you tell us how much of around Rs 94 crore that you are raising, will go in the development of Italjet models? How much of it will be used for development of SYM, Sanyang Industry Co Ltd models?
A large chunk of this fund would be used for expansion and for accelerating the product development. Currently, we have launched the first Italjet Scooter, Blaze, which has received an excellent response in the market.
Two other models are under development and two other SYM scooters will also be developed using this fund. So, there are about four-five models and the funds would be proportionately used for this.
The larger investment would be done on the SYM model, as this would be completely new platform including design as well as engineering.
Are you looking at more fund-raising plans or do you think that Rs 94
No. I think this particular deal keeps us quite comfortable for the next two years on all our capex requirements. As the company's sales grow, there maybe an additional working capital fund provided by our working capital lenders. In terms of overall fund requirements, this deal takes care of our requirements for the next two to two and a half years.
So you are saying that you do not need any more equity dilution for the next two years at least?
I do not think so. I think that KMCL (Kinetic Motor Company Ltd) has been in a re-structuring mode and has lots on board like SYM as a joint venture partner, BCCL (Bennett Coleman & Co Ltd) as a financial investor and also the Italjet acquisition. I think that it is a time for accelerating the product development and getting into launches and increasing our promotions and sales. This deal would help us to ramp up very quickly.
Along with 15 lakh warrants, which are convertible within a period of eighteen months, you are also issuing about 21.5 lakh FCDs, which are also going to be converted. On conversion, will it lead to any dilution and if so how much will it be?
On a fully diluted basis, this stake in Citibank would technically be 16.42%, which would be above their Sebi limit of 15%. They are to be converted optionally and at definite intervals.
It will depend on Citicorp, how they would like to implement that. Despite of the warrant conversion, promoter's stake will be above 50%. So we would continue to have a controlling stake in the company.
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