External Financing
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Transcript of External Financing
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xternal FinancingBy Group 5
Ashmitha N. S
Ravi Agarwal
Shweta Raghavan
Shweta RammohanSarvesha Kulkarni
Saket Kandeliya
Vibish Parekh
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External Financing Internal Financing
Obtained from financialinstitutions
Obtained from own funds andprofits
Expensive to the firm Less expensive to the firm
SOURCES:Loans Bank, mortgageFactoring debtsDebenturesOverdrafts
SOURCES:Owners fundsSelling personal assetsProfitsReduce working capital
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WAYS OF EXTERNAL FINANCING
Equity
Debt
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Reasonsfor External Financing
Expansion
Diversification
M & A
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RELIANCE POWER LIMITED
Established to develop, construct and operate powerprojects in the domestic and international markets
January 15, 2008 - India's IPO record created
The company attracted $27.5 billion of bids on the firstday of its IPO
Reliance Power debuted on the stock markets onFebruary 11, 2008
Reflection of investors confidence- The upper cut offprice for the bid was Rs. 450
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-Reliance Power IPO A good bet for investors
IPO was priced in the Rs 405-450 band
Issue-10.1% of Reliance Powers total equity
Value of the company- Rs 110,000 crore
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Company Profile Review
Financial stability during tough liquidity conditionsshow good management competency
Cash in the books adequate to fund the current
projects without further Equity dilutionSurplus coal reserves could add significant value in
the future
R-Power has the potential to earn Rs 4,000 Cr fromcarbon credit sale
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TATA STEEL Ltd
Established in 1907
6th largest steel producer in the world
Annual crude steel production capacity of 30million tonnes per annum
Paid up capital of 6203.45 Crs
23% growth in sales in 2008-09
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&Tata Steel GDR
Largest ever Indian GDR offering in the LondonStock Exchange
$500 million raised
Issued 65.41 million GDRs at $7.644 each Total paid up capital post issue is Rs. 8593.45 Crs.
Equity dilution of 7.4%
The deal was managed by JPMorgan ,Goldman
Sachs UBS and Citigroup
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Objects of the issue
Expansion of Jamshedpur plant
Development of overseas mines
Acquisitions of iron ore and coking coal mines
abroadGreen field projects at Jharkhand and Chattisgarh
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&GDR Market Reactions
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hare Prices cont.... Date Open High Low Close 14-07-2009 345 360 345 358.2 15-07-2009 361 382.45 361 380.2 16-07-2009 386 404.3 380 385.1 17-07-2009 388.1 396.9 386.1 392.75 20-07-2009 398 401 387.4 391.1 21-07-2009 387.95 414.7 377 411.75 22-07-2009 415 424 394.05 398.3 23-07-2009 406.1 418.25 403 414.75 24-07-2009 420 442 419.3 439.9 27-07-2009 440 459.6 435 457.35 28-07-2009 459 471.85 448.3 468.95 29-07-2009 467 470.3 426.55 441.9
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Benefits
Marks a significant milestone in the company's capitalraising journey
Demonstrates the investors interest in the Company'sstrategic direction
GDR offering has attracted demand from very goodquality investors which enabled the company toincrease the offering size from USD 400 million toUSD 500 million
Help in capitalizing the Balance Sheet
Enable deployment in highly attractive projects- likethe ongoing expansion of Jamshedpur in India andoverseas mining projects
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Subhiksha
Pushing the accelerator instead ofbrakes
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Company Profile
Founded in 1997 by R Subramanian.
Business: Discounted Retail
1997: 10 stores
1999: 19 stores2000: 50 stores
2003: 140 stores
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2004: Source of funding Rs.160 Crs of Equity Rs. 220 Crs of Debt
Rs. 125 Crs Bridge Loan
2007: 670 stores
2008: 1650 stores
Cont..
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Outcome
Stores doubled from 672 to 1320
Revenue increased from Rs 833 Crs to Rs 2305Crs
Profit increased from Rs. 11 Crs to Rs. 39 Crs
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Used Working Capital for Expansion
Collapse of stock market
Used 125 Cr of bridge loan for expansion
Default in vendors payment
Feb 2009 stores were zero
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conclusion
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