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FE Investor Bureau
MUMBAI, Sept 4: The primary market is dormant, the secondary market turbulent and the new listing counters listless. At least three public issues of calendar 1998 are due for listing, but there is no sign of them on the bourses.
The fully convertible debenture (FCD) issue of Dewan Sugars that `bombed' on June 3 is already 92 days old. Also, the equity offers of JRD Finance and City Union Bank, which closed on June 26 and June 27, respectively, are now 69 and 68 days old. Yet nothing has been heard about the listing of these issues till September 3.
The equity shares of Dewan Sugars Ltd (DSL) are already listed on the Delhi and Kanpur stock exchanges. But the company proposed to list its FCDs on one more exchange in the West -- the Ahmedabad exchange. However, the FCDs are yet to be traced in the secondary market well after the prescribed limit of 70 days from the closure of the issue.
According to DSL's merchant banker, VB Desai Financial, the FCDs have already been listed on the company's regionalstock exchange at Kanpur on August 11 and on Delhi on 12 August. In other words, the merchant bankers claim to have completed the listing formalities within the 69th and 70th day respectively, albeit with no trading.
It may be recalled that DSL, which made its capital market foray on May 25 with a Rs 13.71-cror public issue of FCDs, fared very badly. Public subscription amounted to less than 10 per cent of the issue. The only saving grace was that the issue was underwritten by a galaxy of brokerage houses and merchant bankers led by UTI Securities which alone made a Rs 4.25-crore commitment. The other underwriters to the issue were VLS Finance (to the tune of Rs 2.50 crore), VB Desai Financial Services (Rs 1.56 crore), Canara Bank (Rs 1.50 crore), Allahabad Bank (Rs 1.50 crore), Punjab & Sind Bank (Rs 1 crore), UTI Bank (Rs 0.50 crore) and BOB Capital Markets (Rs 0.25 crore).
These unlucky underwriters, saddled as they are with the devolved wares, would obviously look for an early opportunity to getout. But as of now, DSL does not seem to be in any great hurry to provide the `sweetener' to them. Enquiries now reveal that like DSL, City Union Bank (CUB), too, has completed the listing formalities for its premium public issue of Rs 21 crore by September 3, though one is yet to hear about it officially.
As per the offer document, the shares of CUB were to be listed on the Mumbai, Chennai and National stock exchanges. According to market sources, trading in CUB's shares is likely to start on BSE in a day or two.
Meanwhile, a source in CUB strongly asserts that trading in the scrip has already commenced on the Madras Stock Exchange on September 3. Only MSE's price list does not endorse the assertion as it contains no share price for CUB on that day.
While on the search of DSL and CUB on the official list, a new scrip has been spotted on the Ahmedabad Stock Exchange a few days ago. Almost 15 months after going public, the Bihar-registered but Gujarat-located Avi Polymers Ltd (APL) has made its maidenappearance on the Ahmedabad Stock Exchange on August 28.
Avi made its Rs 3.30-crore public issue of equity shares at par in June, 1997. The company had proposed to list its shares on its regional exchange at Magadh and on ASE. In fact, the company managed to get its shares listed on both these exchanges on September 1 last year -- 81 days after the issue closed. But the APL shares were never traded. Now, nearly one year after its listing, the APL scrip has finally recorded a maiden quote on the ASE on August 28.
Interestingly, while the secondary market sentiment is sagging, APL has recorded a capital appreciation of 10 per cent over its offer price on the first day of trading. Nevertheless, after the share quoted at a premium in its first innings, it has now gone into oblivion. The scrip's status on the Magadh Stock Exchange is also not known.
With regard to APL's credentials, at the time of going public last year, the promoters of the company, Patels of Ranchi, had eight more companies/firms engagedin various businesses. But only one company which manufactures galvanised strips had any decent performance to its credit. What's more, despite a firm order from Gujarat Telephone Cables to lift 4,000 tonnes of sheathing compound in the first nine months of 1996-97, APL could produce only 1,080 tonnes. It has seen a pathetic capacity utilisation of just 24 per cent. Of course, as always the offer document of APL too had stated emphatically that the company would not find any difficulty in marketing its full capacity of 4,500 tpa. Looking back at the manner in which the prospectus had been drafted, one wonders whether the promoters and their merchant bankers were ever serious about anything at all.
For instance, in the offer document, at one place they had stated that the company's polyal capacity would be 1,000 tpa while in another place it was presented as 100 tpa! Further, about the implementation of the project, they had claimed that the expansion project had already been completed in the year 1995-96.But the "schedule of implementation" revealed that the "expansion and diversification project" would be partly completed in March, 1997 and fully by October, 1997. Also, APL's offer document did not clarify whether the order of 4,000 tonnes from Gujarat Telephone Cables was a one-time order or a repeat for every year.
Though APL's was a manufacturing project, the value of its productive assets i.e, plant and machinery, at Rs 1.53 crore accounted for less than 23 per cent of the total project cost of Rs 6.75 crore. In fact, the Rs 2.64-crore working capital margin at 39 per cent was the largest component of the project cost. Still worse, the company had three statutory auditors in as many years. With such credentials, what APL can offer to the investors is anybody's guess.
(Arranged by Investar -- The Aarthik News & Research Syndicate)
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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