Suyog Telematics (STL) has approved to issue warrant on 12th Aug 2023 at price of Rs. 570 (vs CMP of Rs. 1,176)
Post the warrants promoter’s stake will increasing by ~10% from ~47% to ~57%.
What is the purpose of issuing warrants?
STL plans to triple its tower asset base by adding 10,000 small cell towers to the current base of ~4,300 towers over the next two years. Yes, its 10,000 and not a typo ie., 2.3x from the current capacity.
Total money required for the capex is Rs. ~600 Cr. (Rs. ~6 lakh per tower).
This Capex will be divided in two years.
In FY25, the company plan to invest Rs. ~250-300 Cr.
Source of money
The company is expecting Rs. 150-170 Cr through internal accruals in FY24 and FY25. Further, Rs. 60 Cr is infusion by the promoters through warrants.
The additional Capex may be through borrowings or further warrants issuance.
Observation
The allotment of warrants to promoters reflects their confidence in the company’s future prospects and commitment to its growth strategy.
While there is no clear guidance for the second-year capex plan. It is expected that the successful completion of the first year’s Capex will yield adequate cash flow for expansion in the second year.
Source - Bastion research
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