NEW DELHI, February 4: The foreign promoters of Denso India are planning to raise their stake in the company through the company's proposed rights issue. The Rs 18.13-crore rights issue is priced at Rs 50, way above the market price of around Rs 35.The Japan-based foreign promoters - Denso Corporation, Asmco Corporation and Sumitomo - have already obtained the FIPB nod for picking up any shortfall in the rights subscription, according to a company official. The company has also applied to the Reserve Bank of India for the same. The rights issue will be made in the ratio of one share for every five shares held. The issue will open for subscription on February 23 and close on March 25.
The chances of promoters hiking their stake from the present 51 per cent seem to be strong, considering that the company is charging a premium of Rs 40 when the current market price is around Rs 35. However, the extent of increase in the promoters' stake depends on the amount of unsubscribed shares. Though the market pricereflects a dim view of the auto component industry, the company official claimed that the premium is justified as the prospects of the industry are bright.
If the issue faces any major shortfall in subscription, the rights route for raising the promoters' stake will be more cheaper considering that they infused fresh equity at a premium of Rs 90 in June, 1997. Through the preferential route, the promoters have increased their combined stake by 5.66 per cent to 51 per cent. Denso India's scrip was quoting at around Rs 92 at the time of its preferential issue.
The present issue forms part of the company's resource mobilisation programme to double Denso India's auto components manufacturing capacity to meet the increasing demand from automobile producers. The expansion cost is estimated at Rs 70 crore and is being funded through proceeds from last year's preferential issue of Rs 18 crore, the forthcoming rights and internal accruals and short-term borrowings to the tune of Rs 33.5 crore.
After the rightsissue, the company's equity will increase from Rs 18.13 crore to Rs 21.75 crore. The company at present supplies 60 per cent of its major auto components to Maruti Udyog Ltd. For the first half of 1997-98, net profit plummeted by 32 per cent to Rs 3.81 crore compared with the corresponding period of the previous fiscal. Sales registered a marginal growth of 9 per cent to Rs 67.41 crore.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
