InvestorQ : Can you tell me what it means that Ultratech is raising funds through sustainable bonds? What is the advantage of the same?
diksha shah made post

Can you tell me what it means that Ultratech is raising funds through sustainable bonds? What is the advantage of the same?

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Dilmini Mercia answered.
3 months ago
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India’s largest cement company, Ultratech from the Aditya Birla Group, plans to raise a sum of $400 million through the issue of global bonds in the international market. What is unique about this issue is that it will be via ESG Bonds or Sustainable Bonds. This is the first time that Ultratech will be raising money through these kind of bonds.

The reasons are not too far to seek. There are growing concerns in the cement industry and within the management that the international image of the company is taking a hit on account of the impact that cement manufacturing has on the environment. This issue of bonds will help Ultratech party offset such risks.

The ESG or Sustainable bonds of Ultratech will have a maturity of 10 years and will be priced at a mark-up spread to the 10-year treasury benchmark yields. Considering the current global interest environment and the limited currency risk for Indian companies, it does look like a good idea. But the real catch could lie in the terms of the ESG bond.

That is because; the ESG bond has a clause in terms of environment sustainability target for the company with milestones to measure the achievement. If Ultratech fails to achieve the target for environment sustainability by the end of the first year, then automatically it will have to pay interest rate that is higher by 25 bps for the next 9 years till the maturity of the bond.

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kartikeya sain answered.
3 months ago
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Ultratech Cement to raise up to Rs3,000cr via dollar-denominated bonds; stock gains ~1% ... Ultratech Cement Limited board on Wednesday has approved raising
Rs3,000cr funds by way of issuance of foreign currency (US$) denominated bonds.

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