The rights-cum-public issue is slated to open shortly. The company has still not decided on the coupon rate for its FCD with a face value of Rs 100. But sources say the interest could be pegged between 17 and 18 per cent.

The company has received underwriting commitments from ICICI, IDBI and SBI. I- Sec has been appointed managers to the issue.

The floor price has been reduced by Rs 5 from the earlier issue price range of Rs 15-20. Swil's earlier attempt at a rights issue, however, came a cropper because of lack of demand for the issue. The terms and conditions of the present issue have been slightly altered, with the conversion price slated to be 80 per cent of the average of the previous three-month price on the BSE. However, the conversion would be within the range of Rs 10 to Rs 20.

This is the second time in the last one year Swil is raising money to part finance its 50,000 tpa smelter project coming up at Bharauch in Gujarat. The cost overruns on the project has shot up by Rs 131 crore. From the original costs of Rs 464 crore, it has mounted to Rs 595 crore. This has considerably reduced the attractiveness of the project. According to the company's annual report, the addition of a captive power plant resulted in the upward revision of the project cost.

The problem for the earlier issue had been the insistence of the Sebi other sources for finance should be tied up before the company comes out with the rights cum public issue. According to company sources, now that the additional funds have been tied up, the company is today free to go ahead with the issue.

The actual issue type and further details of the issue would be known after the merchant banker files the letter of offer with Sebi. Market sources claim that this is expected to be done in a couple of days. At that time the rights ratio and the exact percentage for rate of interest for FCD would be known.

However, sources claim that the ratio of rights would not be much different from 3:13 offered earlier. With that the public portion would be approximately Rs 53 crores while the remaining would be offered to existing share holders.

Swil's performance in 1997-98 was not anything to write home about. The company earned a net profit of Rs 0.79 crores compared to 2.79 crores during the previous year. The sales turnover declined to Rs 171 crore last year compared to Rs 202 crore in 1996-97. The company's major business is in producing import substitution products for paper and synthetic fibre industry. With exports sales dwindling, the company's performance has been hit. Although the company paid 20 per cent equity dividend in 1996-97, the dividend for equity share holders was nil in 1997-98. The preference shareholders got their dividends in time.

INSIGHT

The only option left: The financial institutions seem to have no option but to finance Swil. Since the debt-equity ratio of the company was very high, further loans were not practicable, and equity expansion was the only option for funding. And that is what the company has gone for. Institutions are unlikely to see any capital appreciation in the short run as the conversion price will be close to the market price. The stock has been on a five-year downward spiral and is available at Rs 12. The lowest price at which the conversion will take place will be Rs 10.