Brand building, new launches and acquisition is likely to see through Henkel Spic in the coming times. Further, the capital infusion by its technical-cum-finacial collaborator, Henkel KGaA of Germany, is likely to boost the company's finaces. The company's plans to issue non-convertible redeemable preference shares (NCRPs) to Henkel KGaA is likley to result in a net inflow of around Rs 28 crore.

More importantly, the cash inflow could not have been at a more opportune time as the company's products are facing stiff competition from other multinationals like Hindustan Lever and Procter and Gamble. The inflow of funds would help the company consolidateits operations in India to gradually gain a foothold in the huge detergent powder and liquid cleansers market, resulting in improving its financial performance and reducing its accumulated losses of around Rs 34 crore.

The company has also been reeling under high interest cost in the past few years and infusion of funds would help the company bring down its outstanding debt (March 1997) of Rs 67 crore. The interest cost for the half-year ended September 1998 increased substantially to Rs 4.58 crore from Rs 2.47 crore in the corresponding half of last year. High interest cost has been responsible for higher losses.

Turnover for the six-month ended September 1998 improved by 44 per cent to Rs 56.4 crore. Despite a 85 per cent jump in interest cost to Rs 4.58 crore, the gross loss dropped from Rs 2.49 crore to Rs 1.29 crore and net loss from Rs 4.93 crore to Rs 3.86 crore.

Contrarians seem to have already identified the Henkel Spic scrip which has shown an appreciation of over 50 per cent in the past onemonth. The scrip has risen from Rs 24 in August to peak Rs 36 in September on the Bombay Stock Exchnage (BSE).

After dropping marginally to Rs 29, the scrip has again shot back to Rs 33. In the past ten months, the scrip has slowly risen from Rs 11 in Feburary to the current level of Rs 33. At the same time, a huge equity of around Rs 74 crore could be a deterrent for the investors as the company's equity-turnover ratio is very low.