The GDRs accounted for the larger portion of the fundraising exercise after the size was increased to $130 million from $100 million. CLSA was sole bookrunner for this portion of the deal, which was done without any roadshow and completed late Friday (March 24).
Due to the limited marketing, the GDRs were placed with a small group of only nine investors, although sources close to the deal say the book was still three times covered at the final size. About 85% of the deal was placed with long only funds.
Asian accounts took about 70%, while the remainder went to Europe. The offer was not open to US investors.
The price had to be adjusted after the companyÆs share price rallied 9.1% on the final day of the three-day bookbuilding session and ended up being fixed at a 5% discount to the most recent close (March 24).
The 17.5 million GDRs were offered to investors at an indicative range of minus 3% to plus 3% relative the spot price, but as a result of the rally the parameters were reset to allow the deal to price off the five-day average.
The final price was fixed at $7.4274 per GDR, which translated into Rs660 per share or a 1.04% premium to the five-day average of about Rs653. The stock closed at a new record high of Rs697.45 on Friday and Rs639.4 on Thursday. Each GDR is equal to 0.5 common share.
The CB, which was arranged by Citigroup, has a five-year maturity and a base size of $100 million, but includes a 15% greenshoe.
The bonds were priced with a conversion premium of 30% over the price of the GDR. The coupon is 2%, payable semi-annually, which gives a yield to maturity of 6.65%.
There is an issuer call after 18 months subject to a 125% trigger.
One observer said investors were keen to buy into the company because of its dominant 45% market share in India û the fastest growing spirits market in the world - and the potential for further synergies from its $354 million acquisition of smaller rival Shaw Wallace in March last year.
The company, which focuses primarily on whisky, rum, vodka and brandy, also has an 8.5% share of the international liquor market and its McdowellÆs No.1 Brandy is currently the worldÆs largest selling brandy with sales in excess of 4.8 million cases, according to Impact International.
Mcdowell is part of the UB Group, which is run by tycoon Vijay Mallya and also owns the Kingfisher Beer brand and Kingfisher Airlines.
ôItÆs a fast growing company with falling input costs as the price of molasses, which is a key raw material, has been declining from the end of last year. And if they pay off a lot of the debt incurred at the time of the acquisition, you will get a financing kicker to the earnings as well,ö the observer said.
Mcdowell had earlier said it wanted to repay at least half of the $300 million it borrowed to buy Shaw Wallace and in a statement issued late Friday, UB Group CFO Ravi Nedungadi said the repayments will ôgo a long way in deleveraging the companyÆs balance sheet.ö
Part of the funds will also be used for strategic initiatives or other acquisitions, Nedungadi added.
Research analysts at CLSA are projecting the companyÆs earnings will increase at a compound annual growth rate of 100% over the next two years. The fiscal 2006 net profit is seen to be around 3.5 times higher than that in 2005.
The share price fell 2.23% to Rs681.9 on Monday in the wake of the GDR sale, which will result in an immediate dilution of about 15% of the existing issued share capital. It has tripled over the past 12 months, however, largely due to the stronger market position following the Shaw Wallace acquisition and expectations that a rise in disposable income will lead to a pick-up in the consumption of spirits.
According to the companyÆs website, the number of Indians that are of alcohol-consuming age is expected to increase by 100 million over the next five years.
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