Shares of this small-cap company surge after the announcement of a major debt resolution plan

Shares of this small-cap company surge after the announcement of a major debt resolution plan

by 5paisa Research Team Last Updated: Dec 14, 2022 - 12:08 am 14.7k Views

The plan shall result in a significant reduction in interest burden to the tune of around Rs 400 crore annually.

Shares of Hindustan Construction Co Ltd (HCC), an S&P BSE SmallCap company, are buzzing on the bourses today. As of 3.05 pm, the shares of Hindustan Construction Co. Ltd are trading at Rs 14.66 apiece, higher by 19.97% over the previous close. Meanwhile, the frontline index S&P BSE Sensex is down by 0.21%.

Even in the pre-opening session today, the company’s shares witnessed heavy demand from buyers. During this time, the share price surged by nearly 6%. The surge in the share price has come on the back of an announcement made by the company.

On Monday, the company announced the completion of its debt resolution plan. This plan received support from 23 banks and financial institutions and has carved out a significant portion of HCC's debt along with commensurate assets from its balance sheet. With this, the asset-liability mismatch faced by HCC on account of delayed realization of its arbitration awards and claims has been addressed.

Under this plan, HCC has transferred Rs 2,854 crore of lenders' liability along with beneficial economic interest in arbitration awards and claims of Rs 6,508 crore as consideration to a Special Purpose Vehicle (SPV). Upon repayment of SPV liabilities, HCC will have the right to receive surplus cashflows as a separate transaction, from the realization of awards and claims (expected to be of significant value).

The plan shall reduce the debt on HCC's books to Rs 3,575 crore, resulting in a significant reduction in interest burden to the tune of around Rs 400 crore annually. Another benefit of this plan is the comfortable and back-ended principal repayment over 10 years. This structure will enable HCC to focus on growth by increasing its liquidity and internal cash flow generation.

Hindustan Construction Co Ltd is principally engaged in the business of providing engineering and construction services.

Today, the scrip opened at Rs 12.95 and has touched a high and low of Rs 14.66 and Rs 12.76, respectively. So far 1,39,50,298 shares have been traded on the bourses. The stock has a 52-week high and low of Rs 20.03 and Rs 9.10, respectively on BSE.





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