Ind-Swift Laboratories' Rs 5.78 crore issue at a premium of Rs 5 per share is bound to raise some eyebrows especially as it has not been a consistent performer. Even though some financial institutions are participating in the company's Rs 30.06-crore bulk drug project, which has been appraised by the Industrial Reconstruction Bank of India, the premium is unjustified. In fact, Ind-Swift and its private promoters are facing as many as seven litigations.

The company is setting up facilities to manufacture cefotaxime sodium (10 mtpa), ceftraiazone sodium (5 mtpa), erythromycin estolate (12 mtpa), betamethasone sodium (0.12 mtpa), isozsuprine HCL (2 mtpa) and nalidixic acid (48 mtpa). Apart from Rs 5 crore as term loan sanctioned by IRBI, the Industrial Development Bank of India has sanctioned a loan of Rs 10 crore. Besides the term loans, the project is being funded through the public issue proceeds as well as the promoters' contribution of Rs Rs 9.26 crore.

Ind-Swift Laboratories Ltd is jointly promoted by the Punjab State Industrial Development Corporation (PSIDC), Ind-Swift Ltd and its associate concerns — Swift Formulations Pvt, Mukur Pharmaceutical Co Pvt. Post-issue, PSIDC will hold 16.13 per cent of the Rs 10.04-crore paid up capital. The core promoters — Ind-Swift, Swift Formulations and Mukur Pharmaceutical — are engaged in the manufacture of pharmaceutical formulations. However, they have been operating on a very small scale and their track-record is not too impressive.

Five lakh shares have been reserved at a price of Rs 15 for NRIs/OCBs/FIIs, Rs 2 lakh for regular employees (including working directors), 3 lakh for FIs/banks and 3 lakh for MFs. The net offer to the Indian public is 25.59 lakh shares.

The entire public portion is being underwritten. However, only one institution, UTI Securities Exchange, has promised to bring in Rs 60 lakh if the issue does not receive adequate response.

The balance has been underwritten by non-banking finance companies — Onida Finance (Rs 2.1 crore) which is also the lead manager, Master Trust Ltd (Rs 60 lakh), A J Capital (Rs 45 lakh), Bharat Rasayan Finance (Rs 90 lakh), Wadhwa Financial Services (Rs 53.94 lakh), Vishwas Business Associates (Rs 30 lakh) and Financial Focus (Rs 30 lakh).

The project, which was scheduled to go on stream in April 1997, is now expected to be completed this month. However, a further delay cannot be ruled out as so far the company has deployed only Rs 20.69 crore out of the total project cost of Rs 30 crore.

The pharmaceutical industry is crowded with as many as 20,000 players from the organised (500) and unorganised sector. Hence, it will be an uphill task for the company to get even a small share of the market.

On a capacity utilisation of 60-80 per cent, IRBI has projected a net profit of 3.1 crore, Rs 4.51 crore and 4.78 crore on net sales of Rs 37.21 crore, Rs 43.41 crore and Rs 49.61 crore for 1997-98, 1998-99 and 1999-2000. All factor considered (stiff competition and no brand equity), the profitability targets may go haywire.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.