NEW DELHI, Nov 4: The Hyderabad-based NCS Gayatri Sugars will be breaking the four-month lull in the IPO market. Though a relatively small issue of Rs 6.25 crore, the issue is backed by financial institutions.

The issue, which opens on November 21, is fully underwritten by Industrial Financial Corporation of India (to the extent of Rs 2 crore), Industrial Development Bank of India (Rs 2 crore), UTI Securities (Rs 1 crore), BOB Capital Markets (Rs 1 crore) and JM Financial (Rs 25 lakh).

In the last few months, the IPO market has been dominated by bank issues. Apart from Corporation Bank's public issue, ICICI Bank and Gujarat Mineral Development Corporation (both were offers for sale from the promoters), only a few rights issues have been floated in the market.

With a paid-up capital of Rs 18.75 crore, NCS Gayatri Sugars offers 62.5 lakh shares at a price of Rs 10 each.

The entire issue is being offered to the resident Indian public with no reservation for any financial institutions, banks, NRIs or OCBs. The company is demanding Rs 5 on application and the balance Rs 5 on allotment.

Another striking feature of the issue is the participation of financial institutions in the form of term loans.

The company is setting up a Rs 58-crore project (which is being appraised by IDBI) to manufacture white crystal sugar with an installed capacity of 2500 tcd. A major portion of the project cost is being financed through term loans from IDBI (Rs 20 crore) and IFCI (Rs 13 crore). Earlier, the company was planning to tap the public with a larger public issue of Rs 14 crore.

However, due to poor primary market conditions it was forced to delay and trim the issue.

The promoters have brought in their entire equity contribution of Rs 18.75 crore. Their post-issue stake will be 75 per cent. The company, which was incorporated in June 1995, is yet to start operation. The key promoters -- T Subbrami Reddy, T Indira, N Nageswara Rao and T V Sandeep Kumar Reddy -- are making a foray into the sugar manufacturing business.

The project, which was originally scheduled to go on stream in December 1996, is now facing a cost overrun of Rs 2 crore.

After the current issue, the equity of the company will swell to Rs 25 crore. The public issue is lead managed by JM Fianancial and Investment Services and the shares are proposed to be listed on Hyderabad and Mumbai stock exchanges.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.