| |
Karthik Inductions mars OTCEI record
V S Fernando
New listing counters at the major stock exchanges were virtually inactive last week. At least two issues are now due for listing. The much awaited IndusInd Bank is one. In fact, very quick in completing the issue allotment within just 21 days on December 23, IndusInd still continues to be elusive with regard to a "quick listing" for no rhyme or reason. Of course, IndusInd has still enough time to comply with the "normal listing" norms as it will exhaust the stipulated time only by mid-February. But the dilly-dallying of listing after three weeks of allotment is indeed intriguing. Even the merchant bankers have no clue to offer for this delay.The other issue due for listing is the State Bank of Bikaner and Jaipur (SBBJ). This issue allotment was finalised in the last week of December, within one month of its closing as promised at the time of the issue. According to the merchant bankers, the new shares are expected to be traded anytime now. As a matter of fact, SBBJ's old shares are already listed on
Mumbai and Jaipur stock exchanges. It is traded at Rs 555 on BSE, while Jaipur offers no quote. The new shares, which were issued at Rs 540 a piece in November, are proposed to be listed on Jaipur, Mumbai and National Stock Exchange. The listing formalities are said to be over on the regional stock exchange in Jaipur, though trading is yet to commence. Relating to the other two exchanges, the delay is because the new shares are yet to be admitted by BSE and NSE. According to merchant bankers, BSE asked for certain clarifications before listing SBBJ's new shares. The reply has already been sent. Thus, the new shares are now expected to be admitted for trading in a few days time on all the three exchanges. That brings us to the only new listing that has taken place last week. It is the tiny offer of Rs 40 lakh by the Goa-based Kartik Inductions Ltd (KIL) on OTCEI. KIL has an equity capital of Rs 1.44 crore. Two large shareholders of the company offloaded 4 lakh shares, constituting about 28 per cent of the
total equity, at par on November 12 in order to get the share listed on the stock exchange. This offer for sale was sponsored and lead managed by the crisis-ridden sharebroker Sunder Iyer-controlled 21st Century Management Services which was infamous for bringing in many a worthless public issues in the past. KIL's issue closed on November 21. Generally, OTC issues get listed within six weeks of their issue closing but, KIL has recorded its maiden quote after 53 days, on January 13. As if the inordinate delay is not enough, the scrip has inflicted a capital loss of 45 per cent on listing. In fact, this is the biggest loss suffered by any OTC offer on listing till date. It seems that the sponsor, 21st Century Management Services, who is currently facing severe liquidity crunch has miserably failed to play the role of an efficient "market maker" for KIL. Interestingly, Kartik Alloys Ltd, floated by the same promoters, could not command a price of more than Rs 11 on OTC despite an EPS of around Rs 9 and BookValue of Rs 44. Still, the Chennai- based Orchid Chemicals & Pharmaceuticals Ltd picked up 1 lakh of KIL's shares at par before the public offer even though KIL had no great financials. KIL, promoted by a technocrat B Gopala and his associates in 1994, commenced commercial production in July 1995 with an installed capacity of 27800 tpa MS ingots. The project cost of Rs 3.3 crore was funded as follows: equity capital Rs 1.44 crore, term loans from Maharashtra State Financial Corporation Rs 1.55 crore, unsecured loans Rs 8 lakh and internal accruals Rs 23 lakh. As regards KIL's track record, the company has somehow managed to post an EPS of over Rs 2 by the end of fiscal 1997. On this count, the share may look attractive. Nonetheless, the company's profitability advises caution. In fiscal 1997, it could earn a pre-tax profit of only Rs 34 lakh on a turnover of Rs 12.60 crore, profit margin at the pre-tax level being just 2.7 per cent. With such wafer-thin margins, how will KIL face the competition is
anybody's guess. Moreover, when the flagship Kartik Alloys is currently quoted at just 50 paise against its intrinsic value of Rs 44.33 (as on March 31, 1997), who would be interested in buying KIL at above Rs 5? That is a question to be answered by Orchid Chemicals alone. (Arranged by Investar -- The Aarthik News & Research Syndicate)
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
|
 |
