Besides the public issue, Swil is also making a rights issue of FCDs. The company is issueing FCDs worth Rs 62.41 crore to its shareholders. Each FCD has a face value of Rs 100. The company has a current paid up capital of Rs 27.04 crore. The FCDs will be converted into equity shares of Rs 10 at the end of 17 months from the date of allotment. The price will be determined by taking 80 per cent of the average daily closing price of the equity shares on the Mumbai Stock Exchange during the three months prior to the conversion date. The conversion price has a cap of Rs 20 and a floor price of Rs 10. If the conversion takes place at Rs 10, the equity will zoom to Rs142.45 crore and if the conversion is at the maximum price of Rs 20, the equity will rise to Rs 84.75 crore. Importantly, the equity will more than double from this level (depending on the conversion price) after the conversion of FCDs issued on rights basis.

The sharp rise in equity base will see a fall in earning per share. Also, thanks to the time overrun, the project cost has risen from Rs 464 crore to Rs 639.5 crore as apprised by ICICI. The cost-overrun will affect the future bottomlines of Swil, at least for short-term. The very high exposure to high cost debt will also increase the interest burden. This will add pressure on profit margins.

According to the profitability projections by ICICI, the company will operate at a capacity of 80 per cent and 90 per cent for fiscal 2000 and 2001. Apart from a general industrial revival, this will depend on Swil's ability to market its products. Based on this, total income for 2000 and 2001 is projected at 456.2 crore and 513.3 crore respectively. Net profitfor fiscal 2001 is targetted at Rs 19.61 crore.

Swil is setting up a copper smelter and refinery plant (installed capacity 50,000 tpa) in technical collaboration with Bolidin Contech for the manufacture of copper cathodes. Swil's current project is being marked by very high institutional participation. The company has roped in ICICI Ltd, IFCI, IIBI, IDBI and CD Capital Markets for underwritting the public issue of FCDs to the tune of Rs 45 crore. While ICICI and IDBI have committed Rs 17.5 crore each towards underwritting, IFCI will pick up FCDs worth Rs 8.75 crore. IIBI and CD Capital Markets have underwritten the public issue to the tune of Rs 1 crore and Rs 25 lakh, respectively. ICICI, IDBI and IFCI are also advancing bridge loans to the tune of Rs 15.5 crore, Rs 15 crore and Rs 4.37 crore against the public issue.

Besides, the project is being financed through a rupee loan of Rs 246 crore and Rs 206 crore as foreign currency loan, unsecured loan of Rs 30 lakh from promoters, rights issue (Rs 59 crorewhich is already completed), another rights issue of Rs 62.5 crore, public issue of Rs 53 crore and internal accruals of Rs 12.5 crore. The term loans are being advanced by ICICI, IIBI, IFCI, IDBI, SBI, LIC and GIC. The company's past performance has not been impressive. The company has been hit by falling sales and profit margins. This has been reflected in the current market price which is hovering around Rs 11. For fiscal 1998, the company has recorded a net profit of Rs 96 lakh on a total income of Rs 188.12 crore. For the six month period ended September 30, 1998, the company reported a net profit of Rs 65 lakh on a total income of Rs 91.07 crore.

The technical partner of Swil, Boliden will have a stake in the company through picking up the unsubscribed portion, if any, in the proposed rights issue of Rs 62.41 crore. Of the public issue of Rs 53-crore, Swil has reserved 10.6 lakh FCDs for NRIs, FIIs and OCBs.

The promoter group, which holds 44.42 per cent of the current paid up capital of Rs 27crore, is also planning to subscribe to FCDs in addition to their rights entitlement. The public issue opened on March 31 and closes on April 12.

--FE Investor Bureau