UTI is the largest shareholder in Mangalam Cement with 33 per cent, while LIC holds 7.69 per cent stake. The company has not, however, ruled out the possibility of the financial institutions subscribing to the issue. The public shareholders, who hold almost 31 per cent stake, have also largely spurned the offer. Which means even if the institutions come to the rescue of Mangalam Cement, the poor response from the public shareholders could prove to be a stumbling block in the success of the issue.

The poor shareholder response is understandable as the scrip has beentrading below par for quite some time. During August 10 to September 9, the scrip was trading in the range of Rs 8-9.9. Mangalam Cement, an ailing company, is tapping its shareholders to repay the interest liability due to these financial institutions. The Rajasthan-based company, which has a marginal presence in north India, has been affected by a huge interest burden and the recession in user industries. The company's high exposure to debt financing for adding 6-lakh tonnes capacity is eating into its bottomline. Post-issue, the company's equity base will rise substantially. If all the shareholders opt for conversion, the equity will bloat to Rs 29.73 crore, further diluting earnings.

The OCCPS will be converted into equity shares of Rs 10 each at the option of the investors at end of 36th, 48th and 59th month from the date of allotment. Those who do not opt for conversion will get the redemption money at the end of 60th month from the date of allotment.

With a one-million cement manufacturing capacity,the promoter group, K K Birla, has a stake of only 21 per cent in the company. The company is in the red with a loss of Rs 28.74 crore in 1997-98. Net outstanding liabilities as on March 1998 stood at Rs 156 crore against a networth of only Rs 63.33 crore, thereby yielding a high debt equity ratio of 2.47:1.