New Delhi, June 22: Ailing Birla Corp is planning to float a rights issue at a premium in the range of Rs 17-22. The company is offering 2.44 crore shares in the ratio of four shares for every five shares held in the company. While the company is planning to offer equity shares in the range of Rs 27-32, the current market price is Rs 31. Ahead of its rights issue, the stock has seen a steady rise from Rs 28 on June 17 to Rs 31 on June 21 (a gain of 10.71 per cent in two trading sessions). Besides the general buoyancy in the cement stocks, the recent spurt in Birla Corp is based on expectations of a turnaround.The proposed issue of equity shares will improve the company's leverage. The company has been hit by its exposure to high cost debt. During fiscal 1998, the company slipped into the red and incurred a loss of Rs 51.4 crore, mainly due to an interest burden of Rs 45.43 crore. Falling sales and pressure on margins at the operation level have also contributed to the poor performance of the company.
Forfiscal 1998, the company recorded an operating profit of Rs 24.16 which was just 53.18 per cent of its total interest cost. In fiscal 1999, a higher interest cost again proved to be a drag on the bottomline. On a lower sales of Rs 873.3 crore compared with Rs 972 crore in fiscal 1998, the company incurred a net loss of Rs 53.62 crore. While operating profit increased to Rs 32.48 crore, interest cost rose to Rs 53.41 crore.
Cement contributes around 80 per cent of the turnover of the company, while jute goods, yarn (synthetic, viscose and cotton) and calcium carbide account for the balance of 20 per cent. Birla Corp now wants to raise its cement manufacturing capacity from 600,000 tpa to one million tpa. The company has recently launched a brand, Birla Cement Samrat, in West Bengal.
The company has installed capacities of 3.9 million tpa of cement at its plants at Chittorgarh (Rajasthan), Satna (Madhya Pradesh), Durgapur and Rae Bareli in UP.
The company's Rae Bareli plant, set up at a cost of Rs 32crore, has a cement manufacturing capacity of 3.6 lakh tonnes per annum and uses fly ash supplied from the Unchahar thermal plant of NTPC and clinker supplied by Satna works of the company.
Birla Corp has imported from Germany and installed 26 second-hand Dornier looms including machinery for preparatory and finishing process at a total investment of Rs 3 crore and has started commercial production. Of the paid up capital of Rs 30.56 crore, institutions hold a sizeable portion of 40.17 per cent (UTI holding 19.23 per cent, LIC 11.03 per cent, GIC 7.28 per cent and other mutual funds 2.63 per cent).
The promoters hold 27.71 per cent and public holds 31.97 per cent. Post-issue, the paid-up capital of the company will rise to around Rs 55 crore.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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