November 16: Last week, only two new issues were spotted in an otherwise listless new listing counter. Calcutta-based Indian Base Metals Company Ltd (IBMCL), which raised Rs 2 crore from the investing public in August this year, and Mumbai-based Aditya Coatings Ltd (ACL) which made a negligible offer of just Rs 24.5 lakh through OTCEI in October. While IBMCL, lead-managed by little-known Sumedha Fiscal Services, took almost 81 days to fetch its maiden quote, ACL (lead-managed by Bangalore- based ICDS Ltd) was listed 37 days after the issue closure.

A peculiarity of IBMCL is its name. The company's name gives the impression that it is in the metal business, but, in reality, it is into investments! The company, engaged in fund-based activities like investment in shares, bill discounting and inter-corporate deposits, had drawn a funding plan of Rs 2.76 crore. This was met by additional equity of Rs 76 lakh from the promoters and the public issue of Rs 2 crore which opened for subscription on August 18, 1997. The public issue closed on August 21.

On November 10 (81 days after the issue closure), the scrip was spotted on the trading floor of the Calcutta Stock Exchange, which is the company's regional stock exchange. Surprisingly, when scrips of finance companies have become untouchables on the trading floor, IBMCL has been touching a new high every day.

IBMCL registered its maiden quote at Rs 10 and closed at Rs 10.90, giving a capital appreciation of 9 per cent to investors on the first day of trading. The next day, the scrip went into hiding without any quote. Resurfacing on November 12, it fetched a higher quote of Rs 11.50. The rising trend continued the next day and the scrip closed at Rs 12.40. As one is yet to hear about the company's first-half performance, the premium of 24 per cent over the issue price in the secondary market is intriguing.

According to the offer document, almost 65 per cent (Rs 1.79 crore) of the total funds would be earmarked for investments in shares. The company had also proposed to deploy Rs 50 lakh on inter-corporate deposits and Rs 30 lakh on bill discounting. Interestingly, it was not the first time that the promoters raised public money for finance and investment activities. In July last year, the promoters had tapped the market with a smaller public issue of Rs 1.5 crore under a different banner, Purbasha Resources, which was also lead managed by Sumedha Fiscal.

In fact, Purbasha is the single largest shareholder of IBMCL and it had earmarked Rs 1.03 crore for investments in shares and, like that of IBMCL, Rs 50 lakh for ICDs and Rs 30 lakh for bill discounting. In fact, both these companies had identical items in the `particulars' of funds requirement. Both provided the same amount of Rs 14 lakh for issue expenses. While Purbasha had accounted Rs 2.50 lakh for office equipment and Rs 50 lakh for furniture, IBMCL allocated Rs 2.25 lakh and Rs 75 lakh, respectively. Interestingly, both Purbash and IBMCL share the same address, telephone and fax numbers!

On the trading floor, however, both are at antipodes. While a Rs 10 paid-upshare of Purbash Resources was last traded on October 27 at a miserable Rs 1.60 on CSE, IBMCL had seen an appreciation of Rs 2.40 at its last quote. In fact, at the time of IBMCL's public issue, Purbash Resources was quoting at above Rs 6 with a monthly trading volume of 1.5 lakh shares.

Through a bought-out deal in March last year, Aditya Coatings Ltd (ACL) had issued 2.45 lakh equity shares at par to Manipal Investments and other investors. Surprisingly, without booking any profit on their investment in ACL, these corporate investors offloaded their stake to the public in October this year through an `offer for sale', lead managed by ICDS Ltd which is in fact a group company of Manipal Investments. It is intriguing that the offerors, who had been holding the shares for a year, offered shares to the public at the same cost of acquisition. Besides, it is rumoured that SEBI took more than four months to clear the offer document.

ACL had proposed to set up a production facility at Navi Mumbai to manufacture 3 million metres per annum of medical & surgical tapes and microporous tapes. The Rs 1.6 crore project, appraised by ICDS (who also lead managed the issue), was funded through the equity route (up to 50 per cent), term loan from the State Bank of India and lease finance from ICDS. The project, initially slated to commence production in April 1996, was delayed and the schedule was revised to July 1997.

Although the company claims to have begun commercial production as per the revised schedule, it is yet to announce working results of the expanded operations. No doubt, by listing the share in a short period, ACL has demonstrated its investor-friendly attitude. ACL's public issue opened on October 3, 1997, and closed on October 7. On November 13 (37 days after the issue closure), ACL found its first quote. Like IBMCL, the scrip, too, opened its maiden quote at par i.e., at the offer price level. The question, however, is whether the scrip will remain at this level for long?

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.