Mechanics of the Convertible Loan
The fundraise involves raising unsecured loans from various lenders with a specific provision that allows for the conversion of the outstanding principal, in whole or in part, into equity capital. This mechanism is governed by Section 62(3) of the Companies Act, 2013, which requires prior shareholder consent for such conversion terms before the loan is officially raised. The conversion price and the subsequent number of equity shares to be allotted will be strictly determined by the pricing and valuation requirements of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
Strategic Debt Settlement Plan
- Primary objective is the settlement of outstanding liabilities through One-Time Settlement (OTS) arrangements
- Funds will be deployed to clear dues with existing banks and financial institutions
- The conversion option acts as a secondary financing mechanism to conserve cash flow
- Lenders must provide a written Notice of Conversion to exercise their rights during the loan period
- All newly issued shares will rank pari-passu with the company's existing equity capital
Rationale for Fundraise
The proposed borrowing is intended to support the Company in settling its outstanding liabilities with its existing banks/financial institutions through OTS arrangements and to strengthen the Company's financial position.
Financial and Industry Context
Alliance Integrated Metaliks operates within the Iron and Steel products sector, where high capital intensity often necessitates structured debt management. The company reported a TTM revenue of ₹82.25 Crore but faces significant bottom-line pressure with a TTM net loss of ₹97.72 Crore. Currently, the promoter group holds 62.94% of the equity, with 20% of that holding pledged.
This proposed ₹15 Crore infusion through convertible debt represents a tactical move to deleverage the balance sheet and reduce long-term interest burdens through the OTS route.
