VST Industries may drop rights issue, says Fry
OUR CORPORATE BUREAU
CALCUTTA, January 9: VST Industries Ltd, the Hyderabad-based cigarette major, is reconsidering its rights issue of Rs 75.05 crore. This was revealed by VST's managing director Malcolm Fry on Friday.It may be recalled that in the last one year VST Industries has deferred its rights issue twice. According to Fry, the company is likely to decide the fate of the rights issue by July 24. The company may decide to either prune the issue size or drop the issue altogether, Fry said. Fry said the company has been studying various options after the issue was deferred for the second time. UK-based BAT plc, the major shareholder in VST, was prepared to underwrite the issue and take up the unsubscribed part of the issue till the 90 per cent level, he said. BAT was even prepared to extend a line of credit to VST on a commercial basis, Fry said. BAT controls 31.73 per cent of VST Industries through two subsidiaries, Raleigh Investments Company Ltd and Tobacco Manufacturers (India) Ltd. VST, which has been
diversifying into agro-products, is planning to set up a tea processing plant at a cost of Rs 40 crore. Fry said the company is planning to hive off non-performing assets which do not belong to its area of core competency. The proposed rights issue of 55,59,091 zero-coupon fully-convertible debentures of Rs 135 each was planned for meeting capital expenditure of Rs 6 crore, working capital requirements of Rs 19.05 crore and for infusion of around Rs 50 crore into VST Natural Products Ltd, its 100 per cent export-oriented unit in Andhra Pradesh. The company is aiming for a turnover of Rs 600 crore for the year ending March 31, 1998, according to Fry. During 1996-97, the company recorded a turnover of Rs 576.82 crore and a profit after tax of Rs 7.56 crore. Other income stood at Rs 9.03 crore. VST launched Blues Kings in Calcutta on Friday after Pune and Hyderabad. The test marketing was done in Pune. Blues King is a new kingsize brand and will be competing with Classic from the house of ITC. VST's
marketing director Arun Chogle said the kingsize segment forms five per cent by volume of the total share of cigarettes. However, the kingsize segment is growing significantly. The company's marketshare has dropped from 25 per cent to 14 per cent. Fry said VST aims to retain its position among the top three even after BAT launches State Express 555 and Benson & Hedges.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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