Kellton Tech to Raise $10 Million via FCCBs at ₹106 Floor Price; Bond Issue Opens May 16

Hyderabad, May 15, 2025 – Kellton Tech Solutions Ltd., a digital transformation and IT services company, announced its plan to raise $10 million through the issuance of Foreign Currency Convertible Bonds (FCCBs), a move aimed at funding its expansion initiatives and shoring up its global delivery capabilities. The FCCBs will carry a floor price of ₹106 per share, with the issue slated to open on May 16, 2025.

This development has reignited interest in the mid-cap tech stock, with analysts and investors evaluating the impact of the bond issuance on the company’s capital structure, earnings visibility, and long-term strategy.

Let’s break down what the FCCB issuance means for Kellton Tech and whether this could unlock value for shareholders.

What Are FCCBs?

Foreign Currency Convertible Bonds (FCCBs) are a hybrid financial instrument—essentially bonds issued in a foreign currency that can be converted into equity shares of the issuing company at a later date, subject to predetermined terms.

For Kellton Tech, this route provides:

• Access to low-cost foreign capital,

• Flexibility in debt-equity structuring,

• A potential expansion of its global shareholder base.

Deal Snapshot

Here’s a closer look at the finer details of the proposed FCCB issuance:

The company’s floor price of ₹106 represents a premium of ~7.5% over its last traded price of ₹98.50 on NSE as of May 15.

Management Commentary

Speaking about the development, Srinivas Potluri, CEO of Kellton Tech, stated:

"This fundraise marks a strategic inflection point for Kellton Tech as we expand our delivery capabilities across North America and Europe. The FCCB structure offers us flexibility while enhancing capital efficiency, and underscores investor confidence in our long-term roadmap."

Financial Health: A Quick Snapshot

Kellton Tech has been focusing on a turnaround and growth strategy post-COVID, with noticeable traction in digital transformation contracts, cloud consulting, and enterprise modernization.

FY25 Preliminary Numbers (Unaudited):

The FCCB proceeds are likely to further strengthen the company’s debt profile, potentially bringing debt-to-equity below 0.4x over the next 12 months.

Stock Performance: Building Momentum?

Kellton Tech’s stock has seen steady recovery from its 52-week low of ₹64.20, gaining nearly 53% over the past six months. The announcement of FCCBs, typically viewed as a growth-focused capital raise, has helped improve sentiment.

While the bond’s conversion may lead to equity dilution in the long term, the relatively high floor price signals management’s confidence in the company’s valuation trajectory.

Strategic Use of Proceeds: Growth Without Over-Leverage

According to the company’s exchange filing and investor briefing, the $10 million raised via FCCBs will be utilized as follows:

Use of Proceeds:

• ₹35 crore toward expanding delivery centers in Texas and Dublin

• ₹20 crore to fund AI and cloud transformation product lines

• ₹15 crore to pare down short-term borrowings

• ₹10 crore for working capital and client onboarding in APAC

• Balance funds earmarked for R&D and cybersecurity tools

The strategy reflects a balanced capital allocation model, where the company is investing in capacity building while simultaneously deleveraging—a combination that bodes well for future earnings visibility.

Market Sentiment & Analyst Take

Market watchers are largely viewing the FCCB issuance as a positive signal, provided the conversion does not lead to excessive dilution. Here are a few early takes:

• ICICIdirect (Unofficial note): “Kellton Tech’s bond issuance is an ambitious but necessary step to scale up its digital services business. We expect ROCE to improve meaningfully from FY26 onward.”

• Independent Tech Analyst: “Raising foreign funds without immediate equity dilution is smart. At ₹106 floor, the company is setting the bar high—likely aiming for premium investors.”

• Retail Investor Blogs: Many small-cap forums see this as a trigger for Kellton Tech to move into the ₹120–130 range if FY26 guidance remains strong.

FCCB: Pros and Cons for Investors

 Pros:

• Capital Access Without Immediate Dilution

• Higher Floor Price Suggests Confidence

• Funds Used for Growth + Debt Reduction

• Potential Re-Rating If Execution Succeeds

 Cons:

• Dilution Risk on Conversion

• Foreign Exchange Exposure

• Interest Payment Until Conversion

• Execution Risk in Overseas Markets

Shareholding Pattern (as of March 2025)

With the promoter holding still above 60%, the company retains strong insider skin-in-the-game, which often helps boost investor confidence during fundraising phases.

Outlook: Is Kellton Tech a Re-Rating Candidate?

As India’s mid-cap IT stocks begin to find favor again—especially those exposed to AI, cloud, and digital infra transformation—Kellton Tech seems poised to benefit from broader sectoral tailwinds.

The FCCB issuance can serve as a launchpad for global expansion, especially if the company delivers on its revenue, margin, and digital portfolio guidance. While shareholding dilution from FCCB conversion remains a longer-term watchpoint, the immediate balance sheet strength and growth potential may offset concerns.

Should You Consider Kellton Tech?

Here’s a simplified guide for investors evaluating the stock post-FCCB announcement:

 Buy If:

• You believe in mid-cap IT turnaround stories

• You trust management capital discipline

• You want exposure to USD earnings growth potential

 Hold If:

• You already hold at lower levels (₹75–90)

• You want to watch execution on FCCB utilization

• You prefer to add after Q1 FY26 commentary

 Avoid If:

• You're wary of convertible bond dilution

• You prefer cash-rich, large-cap IT bets

• You’re skeptical of overseas execution risk

Key Risks to Watch

1. FCCB Conversion Dilution – Could lower EPS if equity expands significantly.

2. Execution in New Markets – Setting up abroad often brings cost overruns.

3. FX and Interest Rate Exposure – USD debt adds financial complexity.

4. Tech Talent Shortages – Could limit scalability without hiring agility.

Final Word: A Smart Bet on Strategic Scale?

Kellton Tech’s $10 million FCCB issue may not make front-page headlines like a large-cap IPO, but for discerning investors tracking high-growth digital enablers, this development is a meaningful one. By balancing its growth ambitions with a premium fundraising tool and disciplined capital allocation, the company may have just stepped into a higher orbit.

If executed well, this could mark the beginning of a new growth cycle—especially if the global digital services demand continues to scale.

Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Please consult with a SEBI-registered advisor before making any stock market investments.