Exide Industries' Rs 72.08-crore rights issue priced at Rs 100 seems to be attractive considering the prospects of the company and the current market price. The Exide scrip is currently trading at a premium of around 37 per cent at Rs 136.7 to the offer price of Rs 100. However, as the company itself is expecting a drop in net profit, the scrip may not provide much capital appreciation in the short-term. The investment should be based on a medium to long-term perspective.The company is projecting only 8.5 per cent growth in sales to Rs 542.9 crore for the fiscal 1998. Against a marginal growth in sales, Exide is projecting a substantial drop in profit. The profit after extraordinary item is estimated to fall by 27.5 per cent to Rs 22.4 crore against Rs 30.92 crore during fiscal 1997. Estimated net profit after extraordinary item would have been even less had there been no substantial jump in increase in stock position to Rs 33 crore against a negative figure of Rs 65 lakh during the fiscal 1997. Totalincome is estimated to increase by 14.48 per cent to Rs 585.48 crore.
The forecast is based on the fact that there is a visible slowdown in the automobile industry and as a result, the demand for automotive batteries has been below expectations. Almost a 40 per cent jump in interest cost to Rs 31.15 crore (estimated figure) will also add the woes of the company. The first half results of 1997-98 also indicate an overall sales increase of only 9 per cent as against a sales growth of 42 per cent the previous fiscal. The company is also burdened with an estimated 79 per cent jump in depreciation to Rs 20.5 crore owing to substantial investments in upgradation and expansion of product capacity.
The estimated drop in net profit will also see a considerable fall in earning per share to Rs 6.21 on post-issue capital against Rs 10.73 in 1997. The fiscal-1998 earnings of 6.21 discounts the offer price of Rs 100 by a multiple of 16.1. In fact, at present, Exide's shares are quoting at a P/E multiple of as high as22 times. Considering this, the premium of Rs 90 seems to slightly on the higher side. However, a likely improvement in industrial activity coupled with the current cost cutting measures of the company may help Exide to come out with a good show for fiscal 1999.
The company is tapping the shareholders with the main objective of part-financing the cost of acquisition of industrial undertakings and current assets of The Standard Batteries and Cosepa Fiscal Industries. The company has put the total fund requirement at Rs 165.58 crore. Besides the rights issue of Rs 72.08 crore, the other means of finance include a term loan of Rs 25 crore from bank, Rs 10 crore from private placement of debentures, Rs 45 crore from working capital facilities from banks/institutions and Rs 13.5 crore from internal accruals.
UK-based Chloride Eastern Ltd holds 50.85 per cent in Exide Industries. Besides, Hathway Investments Ltd, which has a 4.73 per cent stake in the company, intends to acquire the unsubscribed portion ofExide shares, if any, in addition to its rights entitlement.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
