Aug 17: The much-awaited listing of Madras Fertilizers Ltd (MFL) is over. The Rs 42.95-crore public issue which was subscribed just one time could rope in 23,629 investors into its fold. Though the shares have been listed now for more than a fortnight, no trading has taken place either on the BSE or the company's regional stock exchange in Chennai. The secondary market has been so indifferent to MFL that even a major accident at the company's premises could not get a reaction for the company's shares in the secondary market.

The 30-year-old public sector undertaking, MFL had a relatively unblemished record of industrial accidents in its long existence until it went public. But, just a week after its maiden listing, the company has met with a major accident. Two workers were reportedly killed and 28 injured when an ammonia boiler exploded at MFL's Manali plant on August 8. Surprisingly, such an adverse news did not have a major impact on the stock prices.

MFL offered its shares to the public for the first time in May this year at a relatively small premium of Rs 5. The Disinvestment Commission had, in fact, felt that MFL's maiden public offer was grossly underpriced. But, the company somehow succeeded in making the government agree to the low premium. Despite pricing relatively low, MFL's issue could not get a subscription of more than one time. The reason for the lukewarm response was not far to seek. The then plight of the stock markets in general, and the fertiliser scrips in particular, did not render much comfort. Moreover, the company had accumulated loss of Rs 9.30 crore at the end of March 1996 which it hoped to wipe out in 1996-97.

However, the expected profit of Rs 12 crore for fiscal 1997 would have yielded an EPS of just 72 paise on the post-issue capital of Rs 166 crore. Perhaps, with a long term view, investors still subscribed to the issue as MFL had undertaken an expansion-cum-modernisation project at a capital outlay of Rs 518.50 crore and on the verge of its project completion, the company entered the capital market. As per the management's own estimate, the expanded capacity was expected to be hooked-up with the existing production line by mid-June 1997.

After the completion of the expansion-cum-modernisation exercise, MFL hoped to save substantially on the energy front and this was expected to bring down the company's cost of production significantly. With a bolstered margin, MFL was confident of achieving a 633 per cent jump in its net profit. Thus, for the current fiscal, the net profit projected was Rs 88 crore compared with the expected profit of just Rs 12 crore in 1996-97.

The resultant EPS of more than Rs 5 for the current year could have easily justified an offer price of Rs 15 as it would give a price-earning of less than 3 times.

Like any other issuer, the MFL's management too was very bullish on the eve of its issue. But, post-issue, one hardly hears anything from the management. Has the company completed the entire expansion-cum-modernisation? Has it achieved the pre-issue projections for fiscal 1997? Lack of information on the company's project status and its current performance has made the market operators as well as the investors completely ignorant about the scrip on the trading floor.

Long wait ahead

New Delhi-based Datt Mediproducts Ltd (DML), which went public in June 1997 and registered in Calcutta, has completed its listing formalities well within the stipulated period. Nonetheless, the prompt listing has failed to garner the investor attention even on the country's premier stock exchange, BSE. Thus, immediately on listing, this `running' company has joined the long list of `no trading' in the official quotation list.

The promoters of DML are not new to the investors. However, the offer document of DML had no mention about the previous issue of Datts and Som Datt Finance Corporation Ltd (SDFCL) was not considered as a group company. The corporate offices of both are located on the same premises (56, Community Centre, East of Kailash, New Delhi). SDFCL's scrip has gone into oblivion since February, 1997.

DML went public with an issue of Rs 4.6 crore at par to part finance its 100 per cent export oriented unit for the manufacture of medical disposables mainly gauze swabs, cotton crepe (elastic) bandage and lengthwise elastic cloth in Gurgaon, Haryana.

The company claimed to have entered into buy-back arrangements for 75 per cent of lengthwise elastic cloth and cotton crepe bandages and 50 per cent of gauze swabs produced, with White Cross Inc, Korea, and Sheng Jih Textiles and Surgical Dressings Company of Taiwan. Further, DML had reportedly entered into a buy back arrangement with Textil Planas Oliveras of Spain for 25 per cent of cotton crepe bandages and 60 per cent of gauze products manufactured. All these exuded a lot of optimism.

In fact, at the time of going public, DML claimed to have already commenced production since February, 1997 and for fiscal 1997-98, the company promised an EPS of Rs 2.84 on a turnover (net profit Rs 3.76 crore) of Rs 23.36 crore.

For the fiscal 1998-99, the company promised an EPS of Rs 3.97 on a (net profit Rs 5.25 crore) turnover of Rs 26.5 crore. However, the company projected dividend only for the year ending March 2000. It seems, the investors have taken DML's dividend projections seriously and have shunned the scrip on the trading floor!.

(Arranged by Investar -- The Aarthik News & Research Syndicate)

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.