Ahmedabad-based Nachmo Knitex is offering 29.69 lakh shares to shareholders at 43 per cent discount to the current market price of Rs 35 on BSE. Offered in the ratio of three equity shares for every 10 shares held in the company, the issue is priced at Rs 20. The Rs 5.94-crore rights issue is primarily aimed at part financing the company's diversification project at a cost of Rs 34.20 crore. The project, already set up and commissioned in September 1997, is an ultra modern dye house for processing cotton knitted fabrics.Earning per share of Rs 6.10 for fiscal 1997 discounts the offer price of Rs 20 by 3.28. Also, the offer price is below the current book value of Rs 27.27. This provides ample scope for a capital appreciation if the company come out with good results. NKL has a consistent profitability and dividend record for the past five years. The company is already manufacturing high quality fabrics. The company has established itself in both domestic and international markets. Since the company is inthe high thrust export area, it enjoys benefits of various nature.
Currently in the business of manufacturing knitted fabrics, NKL's promoters have long years of experience in this area. Over the years, the company has improved its financial performance. During fiscal 1997, its total income increased by 21 per cent to Rs 28.3 crore. However, net profit was marginally up by Rs 4.71 lakh to Rs 3.17 crore. Though the company's interest and tax outgo declined substantially in 1997 over the previous year, depreciation has almost doubled to Rs 36.69 lakh from Rs 18.82 lakh. Total expenses has gone up by 33 per cent to Rs 23.75 crore. On enhanced equity after NKL's private placement in 1997, EPS for the year declined to Rs 6.10 from the earlier Rs 7.40.
The company had surpassed its financial projections for the next three years made during its public issue in 1993, except for fiscal 1994. For year ended June 1996, while it had projected a net profit figure of Rs 2.22 crore, its actual net profit was 41 per centhigher at Rs 3.12 crore. Against the projected EPS figure of Rs 5.26, the actual figure stood at Rs 7.40. However, in 1994, it failed to achieve the same due to some delay in project implementation. However, one of its group companies, Ashima Syntex Ltd, had failed to meet its projections made during its public issue in 1994.
The company now proposes to tap new export markets, mainly in Europe. For fiscal 1998, NKL has projected a net profit of Rs 10.78 crore on a turnover of Rs 69.8 crore. As projected, on the enhanced equity base of Rs 12.87 crore, this should give an annualised EPS of Rs 9.27. However, with the low capacity utilisation record of NKL, the projections seem a bit on the higher side.
The promoters' holding in the company stands at 40.72 per cent, while the rest is with the public and the NRIs. The scrip is listed at Mumbai and Ahmedabad. On the Ahmedabad exchange, the scrip is not traded regularly. Lead managed by MV Shah Financial Services, the issue close on March 14.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
