NEW DELHI, April 29: With the shareholders shunning its Rs 8.9-crore rights issue, Dewan Sugars has been forced to extend the issue by one month. Dewan Sugars has received hardly any application for the rights issue of fully convertible debentures offered at Rs 100 each till the issue closure on April 6, according to one of the lead managers to the issue.The rights issue offered in the ratio of four FCDs for every 10 equity shares will now close on May 6. However, even after the extension of its issue, the company is yet to get any response from the retail shareholders.
"The issue is at a premature stage to draw any conclusion as investors generally pour in money at the last day of issue closing," said the lead manager. The lead manager attributes the dismal performance of the issue to the poor market conditions. However, the poor response from shareholders is understandable as the Dewan Sugar scrip is hardly traded on bourses. The company is listed on the Delhi and Kanpur stock exchanges. On the DSE,the Dewan Sugar counter is hardly active as the scrip has not been traded during the past couple of weeks. Nevertheless, shares of other group companies like Dewan Steel and Dewan Rubber are languishing below par.
The promoters so far have not expressed thier willingness to subscribe to the unsubscribed portion. The offer document says that in case of a shortfall in the issue subscription the company board will have the descrition to dispose off the unsubscribed portion. The poor response to the issue is understandable as investors may doubt the earnings prospects of the company. Contrary to its name, Dewan Sugars has so far been engaged in the field of finance since its incorporation in 1983. The performance of the company in this field has been poor. Now, the company is going in for an unrelated diversification into sugar manufacturing. The company is setting up a sugar project (crushing capacity of 2500 tcd) at a total cost of Rs 60 crore for producing white crystal sugar. The project has term loanparticipation from IDBI, Allahabad Bank and Oriental Bank of Commerce to the tune of Rs 28.5 crore. Besides the rights issue and a preferential issue of FCDs to the tune of Rs 4.25 crore, Rs 18.95 crore is coming by way of a public issue.
The company has also taken a brigde loan of Rs 4.5 crore against the rights issue. The FCDs will be converted into equity shares at the end of 17 months from the date of allotment based on the average market price. Post-conversion of FCDs, the equity base of the company is likely to swell from just Rs 2.24 crore to whopping Rs 29.49 crore.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
