ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Jairaj KapadiaSubscribe to Jairaj Kapadia

Trailing the Market

Trailing the Market Jairaj Kapadia THE hitherto wholly state-owned Indian Petrochemicals Corporation is appeasing investors after it opened its doors to the public with a share capital issue it made four months ago at a premium of Rs 150 per share for an aggregate amount of Rs 320crore. It has now decided to make the investors who had subscribed for that issue and become the shareholders a rights issue of 2.85 lakh shares of Rs 10 each at a premium of Rs 40 per share in the ratio of one-for-five and in a higher ratio of one for one to those of the subscriber- shareholders for the earlier issue who were allotted the shares from out of the employees' reserved quota. It is not clear who this category of shareholders whom the IPCL is placating are, but they are more likely to be institutional investors rather than the common public, as institutional investors are usually the beneficiaries picked out for allotment of unsubscribed surplus out of employees' quota of capital issues by the companies. As these are offered rights shares in 1:1 ratio, the average price of their shareholdings is to amount less at Rs 110 as against Rs 142 for the rest of the subscriber-shareholders for the earlier issue.

Stop-Gap Arrangement

Bombay, Bangalore, Calcutta, Delhi and Madras and was quoted at Rs 127 on March 26 on the Delhi stock exchange. The NCDs at 18 per cent interest have been given by CRISIL the rating of double A minus (AA-), indicative of high safety with regard to timely payment of interest and principal. The issue opened on April 12. Eicher Tractors last raised Rs 396 lakh through a public equity issue in 1988. The company has manufacturing facilities in Faridabad in Haryana, Alwar in Rajasthan, Parwanoo in Himachal Pradesh and Thane in Maharashtra. 1: has established research and development facility at Ballabhgarh in Haryana. It has a technical and marketing arrangement with Capol Farm Equipment (CAFE) of Hyderabad, for the supply of CKD kits to be utilised in the assembly of tractors by CAFE for marketing under the Eicher brand name. The company has shown an impressive growth of turnover. Earning per share has risen from Rs 5.61 to The company plans to use. the present

Hurt by High Interest Costs

be redeemed in three equal instalments at the end of the 7th, 8th, and 9th year from the date of allotment. The debentures are rated by CRISIL as BBB (Triple B minus). The rating indicates sufficient safety with regard to timely payment of interest and principal for the present; however, changing circumstances are more likely to load to a weakened capacity to pay interest and repay principal than for debentures in higher rated categories, SBl Capital Markets, IDBI, ICICI, Bank of Baroda and J M Financial Consultancy Services are the lead managers of the issue.

In the Realm of Hope

In the Realm of Hope Jairaj Kapadia OFFICIAL figures of foreign exchange reserves and of proposals of foreign direct investment approved by the government of India and the Reserve Bank make impressive reading. But as against that, export statistics have proved depressing. Given the situation of the forex reserves getting augmented with the stand by credit arrangement with the IMF and with World Bank loans, it is the position in respect of exports and approved FDI proposals maturing into actual investment of foreign funds that matters in the ultimate analysis. But hope remains of these recording a rising trend after the announcement of the unified market-determined exchange rate of the rupee.

Fear of Profit Squeeze

Fear of Profit Squeeze AS share prices were still plunging a fortnight after the union budget was tabled in parliament, the market assumed a posture that is quite the opposite of what Morgan Stanley, the promoter of India Magnum Fund in the international markets, has projected with the presentation of a supposedly growth-plus budget. Is it that the market is being hypersensitive in seeing it all blue still, or simply that Morgan Stanley is hyped as so often international agencies are by freer growth government policies which the latest budget has further outlined with proposals of tariff cuts together with lower excise duties for industrial goods and products?

Larger Sales

1991, the company now plans to take on major expansion, helped by increasing consumer demand. To enhance its present 50 TPD seed crushing capacity the company has already placed orders for a 100 TPD solvent extraction plant and 50 TPD BSS grade refinery unit. These are being designed and developed by Troika Process, Bombay, reputed suppliers of oils and fat process technology with a clientele spread worldwide. Armed with a completely indigenous technology, the company has an established oil mill at Chhatral, near Ahmedabad, while the proposed project is to be set up at Vadsar, 13 kms away. The civil work is in progress and is expected to be completed by April. According to the appraisals made by Bank of Rajasthan, the project enhance turnover to Rs 3,119,85 lakh and profit (after tax) to Rs 188.89 lakh during 1993-94, yielding an EPS of Rs 5.40 lakh. Capacity utilisation this year will be 75 per cent, which is expected to increase substantially in the coming years resulting in greater productivity arid hence profitability. The company's expansion, designed to capitalise on the diverse uses and market potential of castor oil, is to cost an estimated Rs 389.51 lakh. This is being financed by promoters' contribution of Rs 87 lakh, cash subsidy of Rs 8.35 lakh, term loan/deposits and internal accruals amounting to Rs 56.16 lakh and capital issue of Rs 238 lakh.

Flood of Capital Issues

and auto vinyl super slim wire for which the company has negotiated for techno- logy with Sumitomo Wiring Systems. The company has been supplying IWH to original equipment manufacturers, such as, Maruti, Hero Honda, Kinetic Honda, Bajaj Auto, Mahindra and Mahindra, Escorts and Shriram Honda, in the automotive industry, and Subros and Intron, in the electronics industry. The expansion plan has been appraised by ICICI to cost Rs 20.50 crore. It is to be financed with an equity issue of Rs 11.15 crore, and institutional term loans of Rs 7.20 crore, besides lease finance by the IFCI of Rs 5.45 crore. The promoters are contributing Rs 2.40 crore to the share capital issue, the foreign collaborators Rs 1.21 crore and the institutions Rs 1.35 crore. The company is issuing 33 lakh equity shares of Rs 10 each at Rs 15 premium and offering out of this 11.60 lakh shares COMPANIES FEBRUARY this year has seen a flood of capital issues in the primary market. As estimated by Prime Database of Prithvi Haldia in New Delhi, the number of capital issues in February totalled 84 and the amount of capital issued by the companies aggregated Rs 650 crore, both all- time records. Prime Database has compiled the following figures to show that in both number and amount capital issues during February this year have hit a new high:

Higher Market Share

professionals, V K Patel (chairman) and K R Bhuva (managing director). Equipped with a well developed R and D centre, the company has pioneered the manufacture of double colour/triple colour marbel effect injection moulding machines. It has developed exports to Bangladesh, former USSR and east African countries. The company has tied up with HMT (International), Bangalore, by appointing it as the company's agents for export. The company is setting up a project by way of expansion at Savli near Baroda (a statenotified backward area) to manufacture 400 machines per annum with a capacity catering up to 1,000 tonnes locking force, keeping an eye on export market for higher capacity machines. Various world renowned manufacturers of plastic processing machinery from Italy and Germany have shown their deep interest in joining with PML for joint ventures/ technical collaboration. The cost of the project as appraised by the banks is Rs 950 lakh. The project is being financed with Rs 300 lakh as loan/dpg, Rs 30 lakh as subsidy, Rs 20 lakh from internal accruals and equity of Rs 600 lakh. The promoters have already raised their contribution of Rs 150 lakh, and for the balance amount of Rs 450 lakh the company is entering the capital market with an offer of 30 lakh shares for the Indian public and 15 lakh shares for NRls. The turnover of the company after expansion is expected to be Rs 1,835 lakh and profit before tax at Rs 224,81 lakh. Based on projections, the EPS is estimated at Rs 2.75, Rs 4.25 and Rs 4.70 in the first, second and third year of operations respectively.

Selling Capital Issues

Pearl Polymers, which has made good with manufacture of polyethylene terephthalate (PET) bottles, is issuing 20.8 lakh equity shares of Rs 10 each at Rs 25 premium, and offering out of this 20 lakh shares to the public on February 16 with lCICl and JM Financial as lead managers. The company has an estimated requirement of funds of Rs 17.87 crore, Rs 6.83 crore of it for expansion and Rs 7 crore for investment in Pearl Engineering Polymers, a new company it is establishing for manufacture of PET chips in collaboration with Zimmer of Germany, and with which it will be meeting the entire import requirement of PET chips. Pearl Engineering's project is to cost Rs 84 crore and it will be coming into the market shortly with a capital issue with preferential allotment to shareholders of Pearl Polymers. Pearl Polymers is expanding facilities for production of PET bottles from 48 million annually to 68 million at the existing sites at Jagani, Karnataka, and Mahad, Maharashtra. In addition to the public issue, the company is making a rights issue of Rs 4.04 crore. The expanded facilities are to come into operation by

Prospect of Multi-Sided Growth

with Japanese collaboration which during 1991-92 accounted for over 4 per cent of the market. In a short span of six years the company has disbursed over Rs 100 crore inclusive of its agency business in hire purchase and leasing, enjoying a growth rate of 142 per cent per annum (compounded) since 1987-88. Total income during 1991-92 increased Income for the current year is projected

To What Purpose

lakh aluminium rolling mill at Santej in Mchsana district of Gujarat to manufacture circles, sheets, slugs, strips and other aluminium products. To part finance it, the comp&ny is entering the capital market on January 18 with an issue of 35,50,000 equity shares of Rs 10 each at par totalling Rs 355 lakh, out of which 16,00,000 shares are being offered to NRls and the remaining 19,50,000 shares to the Indian public. According to Janak Kansara, chairman of the company, orders for 380 metric tonnes of aluminium slugs a month from collapsible tube manufacturers have already been secured and enquiries have also been received from leading pressure cooker manufacturers for aluminium circles. The profitability projections are Rs 247.25 lakh, Rs 295.60 lakh and Rs 342.64 lakh capacity utilisation of 70, 80 and 90 per

Conflicting Signals from Foreign Investors

Conflicting Signals from Foreign Investors Jairaj Kapadia QUITE conflicting signals are being seen right now about private foreign capital investment in the country and, whether or not this is a reflection on the new economic policies' thrust towards globalisation, it has put corporate managements much in a quandary. The conflict is seen in the rather discouraging situation obtaining in respect of Euro-issues of capital by Indian companies, whereas in direct foreign investment by way of purchase of listed shares on the market the response by foreign fund managers and institutional investors abroad is getting more crystallised.


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