The Hyderabad-based Innovations International Exim Ltd (IIEL) was promoted in September 1994 by Prasad VSS Garapati, a commerce post-graduate and his associates to make injection-moulded items. Garapati is associated with moulded plastic items since 1983 as a whole-sale and retail distributor of Supreme Industries' moulded furniture and VIP & Aristocrat's moulded luggage. He used to showcase and hawk his plasticware from his "Innovations Showrooms".

IIEL went public in May 1996 with an equity offer of Rs 2.49 crore in order to part-finance its Rs 6.63 crore project which proposed to have a capacity of 2800 tpa injection-moulded items, 160 moulds and 900 kl clearing agents. At the time of going public, IIEL claimed to have already started production since April 1996. And, from the trading activity taken over from Innovations Showrooms Pvt. Ltd, the company reported a business of Rs 12 lakh per month. The lead manager to the issue, Wipro Finance Ltd, appraised, therefore, a turnover of Rs 15.61 crore at 70 per cent capacity use in fiscal 1997 and Rs 17.85 crore at 80 per cent capacity utilisation from fiscal 1998 onwards. For fiscal 1997, the company promised a pre-tax profit of Rs 2.31 crore against a capital base of Rs 5.04 crore. This was projected to increase to Rs 2.79 crore in the next year.

In the enlarged equity of Rs 5.04 crore, the promoters were to hold nearly 51 (Rs 2.55 crore) of which, 25 per cent (Rs 1.26 crore) was locked-in for 5 years, that is, up to mid-2001. Of the public offer of Rs 2.49 crore, the company had reserved Rs 95 lakh for financial institutions, mutual funds, NRIs, OCBs and FIIs who were asked to pay the full amount along with the application. The resident public was to pay only 50 per cent of the issue on application. IIEL's public issue closed in the last week of May 1996. After the public issue, for more than three years, hardly did one hear anything about the scrip either on Hyderabad, its regional exchange or on Mumbai, the other proposed exchange for listing. In mid-October this year, IIEL registered, at last, its `muhurat' trade on BSE. Its maiden quote at Rs 19 recorded a solitary trade of just 200 shares. For the next 10 days, there was no sign of the scrip on the BSE screen. On October 26, it resurfaced again but with a single trade and a negligible gain of10 paise, though the volume was 1000 shares. Thereafter, till mid November, the IIEL scrip became constant `buyer-packed', having a solitary trade or two, always towards the close of the trading session. Then, suddenly, volume in the scrip began shooting up to even over 60,000 shares a day. The number of trades too began multiplying into 100s. Around this time, the sources close to the "operator" in IIEL's scrip claimed that the company had then "reformed" itself into a "medical transcription company" which should give an `infotech rating' to the scrip!

The latest directors' report confirms that the company has entered into medical transcription business by taking over the assets and liabilities of Innosoft - a division of Garapati Eximports Private Ltd. The directors also claim that IIEL is the only company in India to use `Stentura' machines for carrying out medical transcription work. But, they have not disclosed the financial workings of the Innosoft division taken over from the promoters' private company.

From the moulded plastic business, the company has derived a turnover of just Rs 7 lakh in fiscal 1999 on which, it has incurred a whopping loss - over six times the turnover - of Rs 43 lakh! According to the directors' report, the company could not adhere to the projected turnover and profit as sanction of working capital limits by the bank was substantially delayed and the management could not make alternate arrangements to go in for production on a large scale. The moot question that arises here is, if a company could not produce more than 18.05 tonne of its produce even after three years, against its rated capacity of 2800 tonne, what's so great about the proven capability of the management? And, if this is the dismal record of the promoter in injection moulded items, where he claimed more than a decade of experience, how is he expecting investors to believe that he would achieve roaring success in medical transcription business, in which he apparently never claimed any previous experience?

There is one perplexing and unexplained phenomenon about the present rally of the scrip. The company is having just a miniscule shareholder base of just 1300-odd people (as per the data available with BSE). Also, as per available data, a significant portion of the public shares was still partly paid-up, (Source: 1999 annual report). Under the circumstances, who is selling the fully paid shares in the market?

(Arranged by INVESTAR - The Aarthik News & Research Syndicate) [E-mail feedback to: investar@bol.net.in]