Punj Lloyd QIP raises $140 million

Indian conglomerate Punj Lloyd raised Rs6.7 billion ($140 million) from a qualified institutional placement yesterday. The deal was launched early yesterday morning and completed before the Indian markets opened, one week after the company posted favourable quarterly earnings. 

The company initially tapped the market for $75 million, but there was sufficient demand to inflate the deal to $140 million. In the end, 27.9 million shares were sold, which is 7.6% of the company's share capital as enlarged by the deal.

The shares were offered at a fixed price of Rs240.2 a share, which translates into a 5.4% discount to the price at the close on Monday of Rs253.8. This is tighter than the discount on Lanco Infratech's $150 million QIP last Thursday, which priced at a 6.4% discount.

At the close of trading yesterday, Punj Lloyd's shares were down by 5%.

There were around 40 accounts in the book. Investors were described as a mix of Indian mutual funds, as well as international long-only investors and hedge funds. The timing of the deal -- books opened around 8am (India time) and closed before 9.30am -- meant that nearly all of the demand originated in Asia.

The company is a diversified conglomerate with interests in construction, energy, and infrastructure. It will use the capital to acquire capital assets and equipment, augment working capital to facilitate the expansion of its operations, make investments in new initiatives, collaborations and joint ventures, and to generally strengthen the company's financial position.

The deal was launched one week after the company announced its first-quarter results for the 2010 financial year. Revenues were up 12% year-on-year to Rs29.55 billion and net profit was up 27% to Rs125 million. In the three months ending June, the company took orders totalling Rs100 billion, mostly in its infrastructure division. It now has an order book containing Rs279 billion worth of orders, which is equivalent to a backlog ratio of 2.28 times, compared to 1.73 times in the last quarter of 2009.

In a research note published on Friday, Nomura revised its price target for the stock to Rs257 from Rs200, though it maintains its "neutral" rating. According to the note, upside risks include better than expected orders and higher than expected margins. On the downside though, there could be project execution problems, which could affect margins; and the threat of an increase in interest rates.

Citi and IDFC-SSKI were joint bookrunners on the deal.