After the poor shareholder response to its rights issue of Rs 8.9 crore FCDs, Dewan Sugars is tapping the public with a Rs 13.7-crore unsecured fully convertible debenture issue. Each debenture has a face value of Rs 100 and a coupon of 18 per cent. As the shareholders have virtually rejected the rights issue, promoters, who now holds 46 per cent in Dewan Sugars, are in a piquant situation. The poor retail response to the rights issue, understandably, has been mainly due to Dewan Sugars' lacklustre past performance.Importantly, the shares, which are listed at Delhi and Kanpur, are hardly traded on the bourses. As the conversion price is likely to be around Rs 10 (conversion at the end of 17 months from the date of allotment), the offer does not seem attractive, especially in view of the dilution of equity. The equity will further swell as the promoters are going in for a preferential allotment of Rs 4.57 crore.
Taking the minimum conversion price at Rs 10, the equity will see a substantial jump to Rs29.49 crore. As the company is diversifying into an unrelated field of sugar manufacturing and competition in the field, prospects of a good return appear to be bleak.
The entire public issue is being underwritten. IDBI has appraised the project cost at Rs 60 crore. Besides the total FCD issue of Rs 31.5 crore, IDBI is advancing a term loan of Rs 15 crore, Rs 7.5 crore from Allahabad Bank and Rs 6 crore from Oriental Bank of Commerce. Lead managed by V B Desai Financial, the issue opened on May 15, 1998 and closes on June 3.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
