The Rs 4.52 crore rights offer from Khaitan Chemicals and Fertilizers Limited (KCFL) is primarily to part finance its Rs 17.25 crore expansion project and to augment its longterm working capital requirements. KCFL's maiden issue (in 1986), owing to undersubscription to the tune of 30 per cent of the total amount, had to be bailed out by the institutions and the underwriters.Although KCFL's scrip is hovering around Rs 18, its current 1:2 issue is being offered at Rs 30. Along with one equity share, the subscriber would also get two optional detachable warrants of Rs 10 to be converted into two equity shares in phases, within 36 months from the date of allotment. Though the first conversion will be at the face value, the second conversion will be at a premium not exceeding Rs 10 (to be decided by the board at a later date).
As the name suggests, the company is engaged in the manufacture and subsequent marketing of fertilizers and acids. Its business is highly vulnerable to government's agricultural policy,particularly fertilizer policy. In 1995, KCFL had taken up its maiden expansion project to meet increasing demand for single super phosphates and sulphuric acid.
Interestingly, unlike its first expansion project, now the emphasis is on economies of scale and also on setting up of a 2.80 mw captive power plant to meet its power requirements.
Radico Khaitan, one of KCFL's group companies, has a long list of legal cases pending against it. Of the total 42 cases, seven are criminal cases and one is for winding up. The promoters hold 65 per cent of the Rs 3.02 crore equity. However, their influence is more pronounced by their unusually high interest in the transaction of KCFL's shares.
During the last six months, there is again a long list to record the purchases and sales by the promoters in the company's scrips which otherwise is thinly traded on the bourses. A total of 3.92 lakh shares, amounting to more than 10 per cent of the company's paid up equity, were transacted by this group during the periodunder consideration.
Over the years the company has put up improving performance on the financial front. For the half year ended September 1997, the company has earned a net profit of Rs 2.33 crore from a total income of Rs 26.5 crore. Interestingly, the economic slowdown doesn't seem to have had any effect on the company, as its half year's net profit was close to its full year fiscal 1997 net profit of Rs 2.71 crore. Its current EPS (annualised) works out to Rs 7.73.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
