Voltas junks plan for NCD issue, to go for Rs 500 cr bank loan

Voltas Limited has decided to raise funds through a rupee term loan instead of non-convertible debentures (NCDs) on a private placement basis.

In a regulatory filing, Voltas informed the stock exchanges that its board had earlier approved a proposal on October 19 to raise up to Rs 500 crore through issuance of NCDs. However, the company has now opted for a rupee term loan of up to Rs 500 crore from a bank.

The funds will be utilized for capital expenditure related to Voltas’ new manufacturing plants at Chennai and Waghodia in Gujarat. The company said that the alternate funding option made available was the reason behind withdrawing the NCD issuance plan for the time being.

Voltas is one of India’s leading air conditioning manufacturers. The company has presence across various segments like cooling products, air coolers, commercial refrigeration products and mining & construction equipment.

The air conditioning and cooling industry has been seeing a gradual recovery after the Covid-19 disruptions. With demand coming back, companies like Voltas have been focusing on increasing production capacities to meet growth requirements.

Setting up new plants will allow Voltas to cater to rising demand more efficiently. While the Chennai facility is expected to commence operations soon, the one at Waghodia will likely be operational by 2024-25 as per reports.

The current rupee term loan option provides relatively lower cost funding and flexibility compared to NCDs. With interest rates on the rise, companies have been exploring such alternatives to optimize capital costs.

The Rs 500 crore loan will take Voltas’ debt levels slightly higher. But the expansion is expected to boost revenues in the coming years. Voltas stock price has remained flat so far this year amid the challenging macro environment.