Earlier, the shareholders had spurned an attempt by Kanthal AB (a subsidiary of Sandvik AB) to hike its stake in Kanthal India from 51 per cent to 74 per cent. According to a company official, the foreign promoter will be converting its overseas loan to the tune of 10 million krones (Rs 6 crore). The current move from the foreign promoter is also a part of Kanthal India's strategy to arrest the cash outflow in terms of both interest and principal. Kanthal India has been payingaround 7 per cent interest on these ECB loans to the promoter. According to the company source, Kanthal India's liability (interest cost and principle) increased after the depreciation in the value of the rupee.

The company had expanded its capacity at Hosur by building a new wire drawing plant in 1997. The project was financed through external commercial borrowings by obtaining a foreign currency loan from the parent company Kanthal AB in order to conserve its resources for the repayment of the said loan and to consolidate itself.

Kanthal AB had made an offer to its shareholders in February 1998 to buy equity shares at Rs 32 against the prevailing market price of Rs 20 to increase its stake to 74 per cent. However, only few shareholders responded to the offer as the market was expecting a higher premium. The scrip on the Bombay Stock Exchange had also shot up around the offer price of Rs 32. As the retail shareholders largely spurned the offer, the parent company could increase its stake by only 6 percent.

The open offer was to enable the parent to take firm control over the subsidiary's operations. This is part of Kanthal AB's plans to make the company a sourcing base for its Asian operations.

Kanthal India is into the manufacture of high resistance electrical strips, wires, and ribbons, and thermostatic bimetal strips. Kanthal India has been suffering from stiff competition and low margins at operational levels. Its exports turnover has remained stagnant.

For fiscal 1988, sales fell to Rs 13.09 crore from Rs 14.1 crore in 1997 while expenditure remained higher at Rs 12.21 crore for fiscal 1998. Despite the overall bearish mood in the stock markets and poor performance from the company, the scrip is holding on to the level of Rs 29. The company is yet to announce its half-yearly results. The optimism in this counter seems to be based on the foreign promoter's plans to make Kanthal India its sourcing base for the promoter's Asian operations.