An earning per share of Rs 1.07 and book value of Rs 19.2 have not deterred Dhanuka group company, Mint Investments, from charging a premium of Rs 90 on its rights issue. Worse, the promoters have decided to renounce their rights entitlement of 4.83 lakh shares.

As the offer document does not furnish any details of the rights renunciation, one wonders at the realisation from the sale of these shares. More importantly, as Mint Investments is not registered with the RBI, it faces the risk of being barred from business if it has not complied with the RBI order asking all NBFCs to register by July 8.

Moreover, because of the low floating stock (promoters hold 96.18 per cent of the existing paid-up capital of Rs 2 crore), the scrip is hardly traded on the Calcutta exchange. While there was no transaction in this counter in 1994, the following year saw some trading at an average price of Rs 21.24.

In 1996, the scrip touched a high of Rs 75 and a low of Rs 50. Between December and February 1996, again there was no transaction. In March 1997, the scrip suddenly shot up to Rs 116.80. Since then, not a single transaction has taken place.

The S L Dhanuka group company is offering 5 lakh shares of Rs 10 each at a premium of Rs 90 to its shareholders in the ratio of one share of every four shares held by them. One detachable warrant will also be given with two new shares.

While part A of the warrant will be converted into one share twelve months from the date of allotment, part B will be converted into one share eighteen months from the date of allotment. The conversion price for both parts will be decided by the Board of Directors subject to a maximum price of Rs 100 and a minimum price of Rs 10.

Post-rights, the promoters' stake will come down to 76 per cent which will be further reduced to 64 per cent after the warrant conversion.

Financially, the company has been slipping since 1994. Realisations from the sale of shares and securities have dropped from Rs 1.55 crore in 1993-94 to Rs 52 lakh in fiscal 1995-96. For the nine months ended December 31, 1996, the realisation was down to Rs 5.61 lakh.

However, the steadily rising other income component has seen net profit rising from Rs 11.18 lakh to Rs 21.49 lakh in the period under consideration. On an equity of Rs 2 crore, the company has reserves of Rs 1.84 crore.

The performance of other group companies like Dhunseri Tea, Tezpore Tea Company, Jaipur Polyspin, Mayfair India, etc, has not been good. As almost the entire fund requirement of Rs 5 crore for fiscal 1997-98 is being made through this issue and any delay in raising the same would adversely affect the company's performance.

With less than one lakh shares being held by the other shareholders (i.e., apart from the promoters), the company's plans are hinged on the realisation from the sale of the promoters' rights entitlement. Moreover, the requirement of funds has not been appraised by any financial institution or bank.

Most NBFCs are today facing a trying time. Business is down and investor confidence in these companies is at an all-time low. Hence, the scope for appreciation in these scrips in the near-to-medium term is very bleak.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.