Morepan Laboratories' decision to hive off four manufacturing divisions into separate profit centres is likely to further improve the sentiment at the bourses. The hive off plans, which is likely to last three years, the company will have four profit centres namely- bulk drugs, formulations, consumer care and herbal division. The company has also earmarked an investment of Rs 80 crore for expanding capacities and producing new drugs over the next three years.

Marketmen feel the company's decision to have four profit centre under one umbrella is likely to improve its profitability in future. Analysts expect a 10 fold jump in turnover in the next three years and net profit to touch the Rs 200-crore mark. The company reported a Rs 34-crore net profit on a turnover of Rs 256 crore in fiscal 1999. The stock is currently trading at Rs 590.6 and in the last one month, the stock has moved up from Rs 495 to a high of Rs 619. Marketmen expect the scrip to zoom to Rs 700in the next couple of months.

The company plans to manufacture Loratadine and Cisapride, as they go out of the patent regime over the next three years. Four more drugs are in the pipeline, which include Fluastatin (cholesterol reducer), Losartan (anti-hypertensive), Zafirlukast and Monteluast (both anti-asthamatic). The company has recently forayed into the over-the-counter (OTC) category through its consumer care and herbal divisions. The company has launched `DAB' the antacid salt. The company expects bulk drugs to account for 50 per cent of its turnover, formulations for 30 per cent, consumer care for 15 per cent and the herbal division for the remaining five per cent. The company has recently bagged the license from the US Food and Drug Authority (FDA) to manufacture an anti-allergenic drug in India.

Spurt in price ahead of rights issue

The activity at the Antifriction Bearings' counter has seen a sudden jump with the company announcing a Rs 5.78-crore rights issue. Although the market haspunished the company for its mounting losses, the stock rose 7.2 per cent in the past two trading sessions from Rs 11 to Rs 11.8. On Friday, the counter saw a sudden spurt in volumes with nearly 36,668 shares were traded against the daily average volume of few 100 shares.

The stock was hammered on the bourses with the company incurred a net loss of Rs 10.03 crore for fiscal 1999 against Rs 73 lakh in 1998. Now, the company is going to the shareholders with a 1:1 rights issue to fund the cash loss incurred by the company in fiscal 1999. The rights issue is being offered at par against the current market price of Rs 11.8. As the company is doubling its equity size from Rs 5.77 crore to Rs 11.55 by issuing fresh equity shares, the ex-right price will be half of the prevailing market price at the time of announcement of the record date. And for the shareholders, the cost of subscribing to one more share is high.

The promoters, who hold 22.55 per cent of the current equity, are also planning to subscribe toadditional shares in case of an undersubscription. The company, engaged in the manufacture of cylindrical roller bearings, taper roller bearings and ball thrust bearing, has been suffering from low capacity utilisation. With the user industry - commercial vehicle and tractor industry -- is showing signs of a revival, the company has drawn a revival package to improve its falling sales and hence boost its bottomline.

-- Sunita Nagpal and Jai Kumar