The stock has been on a rally since its August-level of Rs 302 and touched a high of Rs 509 on September 20 in 35 trading sessions. The stock had started its southward journey in July soon after the announcement of a not-so-impressive first quarter results by the company. The stock fell further and hit a low of Rs 302 when the market learned that the company was planning a rights issue at a high premium. However, the expectation of a turnaround in the company and the rights offer at a good discount to the prevailing market pricehave triggered a rally at this counter.

Nevertheless, the promoters have committed to pick up any unsubscribed portion of the rights issue which is at a ratio of seven shares for every 10 shares held in the company.

The company had slipped into the red mainly due to its high distribution cost, burgeoning interest burden and high depreciation. However, the proposed rights issue will ease its interest burden without any major equity dilution. As the company acquired the iodised salt brand, Captain Cook, from DCW Home Products, its distribution cost is expected to come down. The company now has got DCW's distribution chain of 1,700 stockists, which can also be used for new product launches. The company's parent, $8.5-billion Bestfoods Ltd of the US, has plans to enhance its presence in India.

A major portion of the proposed rights issue is going towards refinancing of the brand acquisition. The issue proceeds will also be used for redeeming preference shares outstanding to the tune of Rs 24 lakh,re-paying arrears of dividend of around Rs 33 lakh and retire a loan of Rs 12 crore. The debt retirement is expected to improve leverage from 0.89:1 in 1998-99 to 0.49:1 in 1999-2000. There would be a sharp reduction in interest cost from 1.36 crore in 1999 to the projected Rs 0.64 crore. The company incurred a net loss of Rs 1.35 crore on a turnover of Rs 48.57 crore for fiscal 1999. For the first-quarter of the current fiscal, the company incurred a net loss of Rs 1.85 crore on a turnover of Rs 25.59 crore. Although the company recorded an operating profit of Rs 1.54 crore for the quarter, an interest cost of Rs 1.76 crore has increased its net loss.

For fiscal, the projected net profit is Rs 1.13 crore. Net sales are expected to grow by 169 per cent mainly due to the introduction of new products and the company's efforts to improve sales.