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Encouraging first-half performance buoys Krishna Filaments scrip
FE INVESTOR BUREAU
Krishna Filaments has shot up on the Bombay Stock Exchange on announcement of good results and expected commencement of commercial production by January-end. The scrip has appreciated by 17 per cent to Rs 145 in the last four trading sessions. For the six months ended September 30, 1997, Krishna Filaments has reported a net profit of Rs 8.94 crore. Although net profit is lower than the profit figure for the corresponding period of previous year on account of higher depreciation of Rs 2.24 crore, it is higher than the net profit of Rs 7.84 crore for the second half of fiscal 1997. The company came out with a Rs 53.52 crore issue of optional fully convertible discount debenture (OFCDDs) issue in 1997 to part-finance its Rs 184.49 crore expansion programme. The expansion programme includes increasing 3 strand rope capacity from 1800 tpa to 6800 tpa, 8 strand rope capacity from 3600 tpa to 7200 tpa and twines from 1500 tpa to 4000 tpa. These are used by shipping companies and for industrial purposes. The company
also plans to manufacture specialty nets (cap: 3000 tpa) which are used for fishing and other applications.The expansion programme was completed by December 1997 and commercial production is expected to commence by January end. There are only two players in the synthetic ropes business in India, Garware Wall Ropes and Krishna Filaments. The OFCDDs, with a face value of Rs 200, were issued at Rs 160, providing a yield of 20 per cent to the investors. Daewoo Corporation of South Korea also picked up a 16.2 per cent stake (Rs 35 crore) in the company. Both the Indian promoters and Daewoo are committed to convert their OFCDDs at the face value of Rs 200 only. This will lead to an equity dilution from the present Rs 4.6 crore to at least Rs 7.49 crore. The existing 8 strand rope capacity is backed by a 100 per cent buy back arrangement with Daewoo and the company expects to utilise the Korean giant's contacts to export part of the production from its expanded capacity. According to projections from IDBI
listed in the offer document, KFL is expected to operate its present capacity at 90 per cent for the next three years and expanded capacity at 60 per cent and 70 per cent in 1997-98 and 1998-99, respectively. Demand for speciality fish nets, a high margin product, is projected to shoot up to 39 per cent in 1998 compared to a meagre 5 per cent growth in 1997. The EPS for 1998-99 will depend on the conversion price and the number of OFCDDs being converted into equity (which will, in turn, decide the interest burden and the equity capital). IDBI is projecting an EPS of Rs 11.5 for 1998-99, based on a conversion price of Rs 100. Considering the current market price of Rs 145 and the 33.33 per cent discount, conversion price works out to Rs 97.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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