Seen under the lens, Bausch & Lomb throws up a brighter picture
Jai Kumar N R
Bausch & Lomb India Ltd could be another Bata India in the making for investors. Bata India came out with a rights issue of Rs 77 crore priced at Rs 30 in December 1996 when it was turning round the corner. Bata India is now trading at a hefty premium of around 466 per cent to the offer price. Bausch & Lomb India could be a similar case. It is showing signs of turnaround and is offering rights at an attractive price to investors. The rights proceeds itself will help the company bring down interest cost and strengthen the bottomline.In the past five fiscals, high interest burden and expenditure have been taking a toll on the company, which has been deep in the red. However, for the first-half of the current fiscal, the company has registered a net profit (after extraordinary item) of Rs 3.52 crore. The company is offering 89,01,771 equity shares in the ratio of four share for every seven share held in the company at a price of Rs 40. The annualised EPS of Rs 2.88 (on results for first-half of current
fiscal) based on the post-issue equity is discounted by a multiple of 13.88 times which leaves scope for capital appreciation. In fact, the market seems to have taken note of the early turnaround sign. The ex-rights price has been rising in the past couple of trading sessions. The scrip went ex-rights on November 27 and touched a low of Rs 56.5 (a premium of 16.5 per cent to the offer price). Since then the scrip has gained Rs 14.25 and it is currently trading at a premium of 30.25 per cent to the offer price of Rs 40.As the company has suffered on account of mounting operational losses and higher interest cost, it is now embarking on a restructuring (both financial and operational) exercise to rein in rising costs. The financial restructuring involves repayment of its long-term liabilities. The company has kept aside Rs 21.21 crore for this purpose and the liabilities are on account of early redemption of 17 per cent non convertible debentures issued in 1993. The long-term liability also includes payment
of a part of term loan from ICICI. The company is into eyewear and vision care business. The eyewear business comprises of high quality premium priced sunglasses which the company manufactures and sells under the global brand name, `Rayban'. The company has a strong standing in this segment, especially when it is not facing any major competition. The vision care business involves manufacturing of soft contact lenses and contact lens care solutions which are sold under the brand names of `Bausch & Lomb', `Soflens', `Optima' and Soflens 66tm. In this segment, Bausch & Lomb faces some competition from multinational companies. To revamp its manufacturing operations, the company is incurring Rs 10.74 crore as capital expenditure. Of the funds to be raised, Rs 13.04 crore is earmarked for meeting long-term working capital requirements. This will also enable the company to save on the interest cost. Apart from the rights issue proceeds, the fund requirement of Rs 45 crore will be met from Rs 9.4 crore as
internal accruals. For the first-half of the current fiscal, the company has reported a net profit (after extra-ordinary item) of Rs 3.52 crore on sales of Rs 33 crore. Net profit margins have also improved from a mere 1.09 per cent in the first-half of the previous fiscal to an impressive 10.49 per cent. The full benefits in the form of lower interest and operational cost of the current restructuring exercise will start reflecting in fiscal 1999.Another positive feature is that the foreign promoter Bausch & Lomb South Asia Inc (BLSA) has received the SIA nod for hiking its stake in the Indian subsidiary in the event of any shortfall in its Rs 35.6-crore rights issue which opens on January 12. BASL has already pumped in its share of Rs 11.94 crore in the company. Post-rights, the paid-up capital of the company will rise from Rs 15.56 crore to Rs 24.47 crore.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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