Amidst this all-round crop of misery, the only sprout of solace mushroomed finally from the little-known Patiala-based Agro Dutch Foods Ltd (ADFL), which is poised to reward its investors, though after a wait of over half a decade.

Indeed, elation is a recent emotion at ADFL. Buoyed by the twin facts that the project was promoted in the joint sector by the much-respected Punjab Agro Industries Corporation (PAIC) in league with Malvinder Singh and his associates, and that the ministry of food processing industries had participated in the equity of the 100 per cent export-oriented unit (EOU), the investors, in November 1993, had overwhelmingly responded to its public issue at par.

Nonetheless, ADFL's initial years provedsingularly unexciting. Not surprisingly, the ADFL scrip, which fetched more than 200 per cent appreciation immediately after its listing, reached its nadir of Rs 1.80 in November 1997. For almost two years the scrip was languishing at less than half its face value. It was only towards the end of 1998 that the scrip started looking up.

In December 1998, thankfully for the investors, the wheels of fortune changed for the better at ADFL. Driven by surging turnover and profitability in the third and fourth quarters of fiscal 1999, the scrip shot up beyond the Rs 30-mark by the end of the accounting year. Then suddenly, towards the end of April 1999, ADFL lost steam and fell behind. But since the third week of May, ADFL is back on its march upwards. The sudden tumble and turnaround by ADFL is not without reason. In fact, in a way, it has provided enough reason to sully the promoters' copybook somewhat.

When the scrip was languishing at around Rs 5, ADFL's private promoter group, namely Malvinder Singh andassociates, had agreed to buy out the entire stake of PAIC and ministry of food processing at a price of Rs 30 apiece. In the first week of March 1999, ADFL's promoters organised a press conference to break the news of the company coming of age.

In the aftermath of the press briefing, the scrip promptly zoomed up. With the price peaking, the ministry of food processing had second thoughts. It demanded a higher price even as PAIC settled for the pre-determined buyout price. Under the circumstances, the surmise therefore is unmistakable that the sudden dip in the share price in April was apparently engineered to make the decision-making easier at the ministry of food processing's end.

Sources close to the company concede that ADFL's promoters have succeeded in winning the ministry over at Rs 30 apiece, as originally agreed. They contend that it was after sealing the buyout with the ministry that the promoters convened yet another press conference on May 13 in an apparent bid to stoke interest in thecounter once again. And their efforts have not gone waste.

ADFL has moved up from Rs 21.50 on that day to Rs 36.90 barely two weeks later. To the promoters' comfort, the company's current working does seem to justify the recent spurt in the price of the scrip. The company has done exceedingly well in fiscal 1999. Compared with a net profit of Rs 90 lakh for the whole of the previous year, the company has earned a net profit of Rs 7.36 crore during the second hald alone. For the current fiscal, ADFL is hopeful of netting a profit of Rs 18.5 crore on a turnover of Rs 65 crore. Will ADFL achieve this?

Well, though the company's past record would certainly advise caution, the signs of turnaround are unmistakable. ADFL claims to be on a firmer terrain as its fungi-production has a ready market in developed countries like Europe, Japan, Australia and US.

ADFL also boasts of having the lowest cost of production in the world at just US $12 a case. In fact, thanks to the low cost of production, ADFL is said tohave escaped the brunt of the punitive anti-dumping duty levied by the department of commerce, US, that other manufacturers from competing nations had to endure. What's more, with the output fetching a price at around US$20 a case, the cushion of margin for ADFL is reportedly quite fat and wide.

The management credits the expansion in capacity for its cost advantage. ADFL has been on a continual expansion spree, having already reached an installed capacity of 9,736 tpa from its initial 3,500 tpa. The company has plans to raise its capacity by another 5,000 tpa at a cost of Rs 7 crore every year to take the total capacity to 30,000 tpa by 2002. The entire ost of this expansion is proposed to be funded through internal accruals.

The expansion, when achieved, can make ADFL a significant player in the world market as the present day largest producer of mushrooms in the world is said to have a production level of only about 12,000 tonnes a year.

Coming back to the acquisition of 45 lakh shares from PAICand ministry of food processing, the promoters require Rs 13.5 crore, but post-buyout, their stake will increase to almost 70 per cent. The increase in the private promoters stake does exude a lot of optimism.

At the same time, it is learnt from sources that the promoters are preparing the ground to place 5 per cent to 15 per cent of their enhanced holding with foreigners/collaborators at well above Rs 75 a share. This means that ADFL's price spurt is not over. This ought to be music to the ears of ADFL's public shareholders.

(Arranged by Investar -- The Aarthik News & Research Syndicate)