External Financing

By Group 5

Ashmitha N. S
Ravi Agarwal
Shweta Raghavan
Shweta Rammohan
Sarvesha Kulkarni
Saket Kandeliya
Vibish Parekh
External Financing Internal Financing

Obtained from financial Obtained from own funds and

institutions profits

Expensive to the firm Less expensive to the firm

SOURCES: SOURCES:
Loans – Bank, mortgage Owner’s funds

Factoring debts Selling personal assets

Debentures Profits

Overdrafts Reduce working capital

 WAYS OF EXTERNAL FINANCING

Equity


Debt
 Reasons for External Financing

Expansion

Diversification

M & A
 Benefits of External Financing
 Strategy

 Value-Adding

 Adjusting Value-Adding for Risk



 RELIANCE POWER LIMITED

 Established to develop, construct and operate power

projects in the domestic and international markets
 January 15, 2008 - India's IPO record created
 The company attracted $27.5 billion of bids on the first
day of its IPO
 Reliance Power debuted on the stock markets on
February 11, 2008
 Reflection of investors’ confidence- The upper cut off
price for the bid was Rs. 450



 Issue highlights

Issue Size Rs.10530 Cr-Rs.11700 Cr

No. of Shares 26,00,00,000
Price Band- Rs.405 to Rs.450 (Retail investors have a
discount of Rs.20 per share.)
Offer Date 15th Jan’08
Close Date 18th Jan’08
Listing- BSE & NSE
Face Value Rs.10
 Reliance Power IPO - A good bet for investors


IPO was priced in the Rs 405-450 band
Issue-10.1% of Reliance Power’s total equity
Value of the company- Rs 110,000 crore

 PROJECTS


 RPL plans to develop 13 projects, with total capacity of

28,200 mw
 Projects won through competitive bidding
 Six projects totalling around 7,000 mw are expected to be
funded by the proceeds of this issue
 RPL has maintained a debt-equity ratio of 80:20
 No further equity dilution in the immediate future
 Reliance Power has invited bids for supplying equipment
 Execution risk attached with these projects

 Company Profile Review

Financial stability during tough liquidity conditions

show good management competency
Cash in the books adequate to fund the current
projects without further Equity dilution
Surplus coal reserves could add significant value in
the future
R-Power has the potential to earn Rs 4,000 Cr from
carbon credit sale
 TATA STEEL Ltd

Established in 1907
6th largest steel producer in the world
Annual crude steel production capacity of 30
million tonnes per annum
Paid up capital of 6203.45 Crs
23% growth in sales in 2008-09




 Tata Steel & GDR
 Largest ever Indian GDR offering in the London
Stock 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





 Objects of the issue

Expansion of Jamshedpur plant

Development of overseas mines
Acquisitions of iron ore and coking coal mines
abroad
Green field projects at Jharkhand and Chattisgarh


GDR & Market Reactions
 Share 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
 Benefits
 Marks a significant milestone in the company's capital
raising journey
 Demonstrates the investors interest in the Company's
strategic direction
 GDR offering has attracted demand from very good
quality investors which enabled the company to
increase the offering size from USD 400 million to
USD 500 million
 Help in capitalizing the Balance Sheet
 Enable deployment in highly attractive projects- like
the ongoing expansion of Jamshedpur in India and
overseas mining projects

 Subhiksha

“Pushing the accelerator instead of

brakes”
 Company Profile
Founded in 1997 by R Subramanian.
Business: Discounted Retail
1997: 10 stores
1999: 19 stores
2000: 50 stores
2003: 140 stores



 Cont…..

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

 Outcome

Stores doubled from 672 to 1320

Revenue increased from Rs 833 Crs to Rs 2305
Crs
Profit increased from Rs. 11 Crs to Rs. 39 Crs


 Debt Over Equity
Planned to release an IPO
2008 – 09 Rs. 1000 Cr investment
New line of business
Merger plans with Blue Green Construction Ltd.



 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

conclusion