This may result in a stake hike by promoters from the present level of 52.63 per cent at the time of conversion of CCRPS. The issue is priced at Rs 100 (face value) per CCRPS and the scrip was last traded at Rs 2.50 on the Bombay Stock Exchange in mid-August.

The current rights offering is in the ratio of one CCRPS for every ten equity shares held in the company.

Each CCRPS will be converted into 10 equity shares of Rs 10 at par at the end of 36 months from the date of allotment or as may be decided by the company. While Rs 25 is to be paid during application, Rs 75 would have to be paid on allotment.

The main objects of thepresent issue are to meet working capital requirements, to repay MFL's borrowings and to strengthen the company's capital base.

As per the draft offer document submitted to the Securities and Exchange Board of India, the company's net worth has been severely eroded during fiscal 1998 after it suffered a net loss of Rs 4.53 crore during the fiscal.To make this good, MFL's promoters had advanced a Rs 7.16 crore ICD loan which, post-offer, will be converted into CCRPS. MFL is unlikely to come out of the red during the current fiscal as the company has incurred a Rs 98 lakh loss during the first seven month of the current fiscal ended October 31. These combined losses make MFL a likely BIFR candidate.

MFL is engaged in manufacturing and processing of various flexible packaging products. According to the draft prospectus, lack of skilled manpower seriously hampers the company's manufacturing and results into higher level of wastage and lower inefficiencies.

In addition, the capacity utilisation level in itsmanufacturing plant is also lower than optimum. The offer is being lead managed by BOI Finance Ltd.