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Jai Kumar NR
New Delhi, Nov 19: Universal Cables Ltd is planning to tap its shareholders with a Rs 8.01 crore rights issue at a price of Rs 20. Promoted by The Punjab Produce and Trading Company, Gwalior Webbing Company, Vindhya Telelinks Ltd and Birla Corporation Ltd, Universal Cables plans to issue 40 lakh equity shares in the ratio of one share for every four shares held in the company.
Promoter companies, which hold 41.29 per cent in Universal Cables, plan to subscribe additional equity shares apart from their rights entitlement in order to ensure full subscription to the issue. Against the offer price of Rs 20, the current market price of the scrip is Rs 17. Hence, the premium of Rs 10 appears slightly on the higher side, especially when the scrip is not actively traded on the bourses. Also, the company has been slipping on the financial front in terms of both sales and net profit growth in the past two fiscals.
The premium of Rs 10 does not seem to be reasonable as the current equity expansion is aimed atmeeting Universal Cables' working capital requirements and hence, there will not be any capital expenditure. The working capital requirement is estimated to be around Rs 12.36 crore, of which Rs 5 crore is coming by way of internal accruals besides the rights issue portion.
The cable industry is currently bearing the brunt of a slower growth in demand. And since the company is facing competition from both organised and unorganised sector, its sales have been falling in the past two years.For the fiscal 1998, sales dipped to Rs 200 crore against Rs 228 crore in fiscal 1997.
Showing the same trend for the first six months of the current fiscal, the company's sales was only Rs 80 crore which is less than the expenditure incurred (including interest cost of Rs 3.82 crore). However, other income of Rs 1.97 crore saved the company from incurring losses.
The company recorded a net profit of Rs 1.73 crore for the first-half ended September, 1998. The disappointing half-year performance signals yet another poorperformance for the full year.
For fiscal 1998, net profit plunged to Rs 3.83 crore against Rs 7.85 crore in fiscal 1997. The EPS has been on decline from Rs 4.9 in 1997 to Rs 2.39 in 1998. The annualised EPS for the current fiscal is around Rs 2.17.
A 34-year old profit making, uninterrupted dividend paying company, Universal Cables is into the manufacture and sale of all types of electrical cables, power, paper insulated, PVC, rubber and LT/HT/EHT/KLPE cables, control and instrumentation cables, winding wire and flat cables for submersible pumps including fluoropolymer instrumentation cables and co-axial cables.
Universal-ABB Power Cables Ltd, a joint venture company promoted by the company alongwith ABB, has commenced production and the plant was formally inaugurated on March 21, 1998. The company currently has a share of 15 per cent of domestic market for cables.
After the rights issue, the paid up capital will increase from Rs 16 crore to Rs 20 crore. The financial institutions hold 30.12 percent in Universal Cables and public 27.52 per cent. The company has appointed I-Sec as the lead manager to the issue.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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