NEW DELHI, February 12: Goa Carbons Ltd plans to make a fresh placement of 1.47 crore equity shares to institutional investors like UTI, GIC and SBI to part finance its Rs 100 crore pig iron project. The shares will be issued at around Rs 30-35 each and the company hopes to clinch the deal within a month or two. The previous private placement was cancelled due to the poor response and the money was refunded.Company officials attribute the poor response to the depressed market conditions. Compared with the issue price of Rs 34, the market price of the scrip was much lower at around Rs 20-25. "We could not wait for the market conditions to look up as we had to close the issue within three months of the shareholders' approval as per the SEBI guidelines," said a company official.
This time around, the Dempo group company is hopeful that UTI will pick up shares worth Rs 7 crore. "Negotiations are going on and we are quite optimistic. Once, UTI gives its nod, others will follow suit," noted the official.According to company sources, institutions would be interested in picking up a stake in the unit as it will be a part of the integrated steel project being proposed by Goa Carbons.
"Unlike retail investors, institutions don't go solely by the market price of the scrip. They attach a lot of importance to the project viability,too," added the official.
However, critics say it is unlikely that UTI and other institutions will susbscribe to equity shares unless it is priced properly. The current price of the scrip is around Rs 32 and an appreciation in the scrip price may be necessary to see the issue through.
The company says the project, scheduled to begin commercial production by July this year, will not face an time or cost overrun as the promoters are pumping in the additional money to fill the gap (approximately Rs 23 crore) until the private placement money comes through. The promoters have already brought in close to Rs 27 crore as their share of the private placement money. The other source of fundsfor the project is term loans from IFCI and Bank of India to the tune of Rs 47 crore.
Goa Carbons has also kept its options open for tapping the debt market in case the private placement falls through. At present, the debt equity ratio of the project is 1:1 and we may hike it to 1:5. "However, as of now we are concentrating solely on the private placement of equity shares," noted the official.
The company's foray into pig iron is puzzling considering the sluggish demand plaguing the industry. Says the official, "We have already received some export contracts from our technical partner and we hope to export around 40-50 per cent of out total produce. Although the prospects for pig iron producers is not bright, we hope to command a premium because of our quality edge."
According to sources, the company is using good quality iron ore with a very low ash content sources from the Dempo group's own mines in Goa. Some mines in Karnataka have also been tapped.
For the full fiscal 1997-98, the company hopes toclock a net profit growth of over 300 per cent. "We have had an excellent year primarily because of exports and overall cost reduction," noted the official. In the first-half of the current fiscal itself, Goa Carbons earned a net profit of Rs 4.55 crore compared with a full year net profit of Rs 1.38 crore in 1996-97.
To set up Rs 350cr steel project
Goa Carbons Ltd is negotiating with some domestic and foreign steel manufacturers for setting up an integrated steel project. The Rs 350 crore project, still on the drawing board stage, will be second phase of the diversification programme. Sources say the foundry-grade pig iron project being set up in south Goa may be hived off and merged with this joint venture at a later date.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
