Ceat raises US$10 million in ECBs

Ceat Ltd on October 04, 2006 has announced that ICICI Bank, Bahrain, has sanctioned US$10 million worth of External Commercial Borrowings to meet the costs of the Company’s expansion and modernization program.

The Company has been able to raise the 6-1/2 year ECB at attractive interest rates of 160 basis points above the prevailing six months Libor. The Company has also made arrangements for hedging to cover the future forex risk on drawdown basis.

The Company, which has been consistently working toward a lower cost of capital over the last 3-4 years, has successfully reduced its interest cost to 3% of gross sales this year, down from historical levels of 10%, a benefit attributable to its debt restructuring programmes. The Company projects a further drop in its interest cost to 2.5% in 2007.

The Company will utilize part or the proceeds of the ECB to enhance radial capacity in its Nasik plant from 40,000 tyres to 1,00,000 tyres per month in two phases. The enhancement will largely be in passenger car and utility vehicle radials and also some LCV sizes. The rest will be utilized in capacity addition of its 0TR (0ff The Road) and niche products capacities, as also in modernization of mixing facilities at its Bhandup plant.

The Company projects a revenue enhancement of upto Rs 150 crores, largely accruing in the forthcoming financial year, as a result of this initiative.

In another financial re-engineering initiative aimed at enhancing corporate governance norms at the Company, the Honorable Mumbai High Court recently approved the scheme of amalgamation of three CEAT wholly owned subsidiaries, CEAT Ventures Ltd, CEAT Holdings Ltd and Meteoric industrial Finance Company Ltd, with itself. The shareholders have also approved the balance sheet prepared post restructuring at the Company's recently held AGM on September 25, 2006.

Source : Equity Bulls

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