Interestingly, in March this year MAL's promoter had indicated an issue size of Rs 400 crore to Rs 1000 crore to "take advantage of the stock market boom". But, when the company finally entered the market in the month of July, the issue size was scaled drastically down to Rs 100 crore of which Rs 75 crore was offered through the book building route with a floor bid price of Rs 150 for the Rs five paid-up share.

Though MAL had got the `light weight' merchant banker, HSBC Securities, as book running lead manager to the issue, it had secured a solid backing from three big market movers through their merchant banking arms. Whereas the `lead book runner', HSBC Securities, chose to under write not even a crore of rupees against the issue of Rs 100 crore, the twin market operators Nemish Shah and Manek Bhansali created Enam group underwrote Rs 53.92 crore and the present day big bull- associated Triumph International committed Rs 37.10 crore. SMIFS Capital controlled by Ajay Kayan, a leading bull of the 1992 scam boom, gave a commitment of Rs 7.62 crore. With big names on the company's underwriting panel, the book-built portion of Rs 75 crore was subscribed 4.65 times (Rs 349 crore) in the stipulated period of six days and the issue price was finally fixed at Rs 165. Two weeks after the book building was closed, on July 28, the fixed price portion of Rs 25 crore opened for subscription.

Surprisingly, the fixed price portion of 15.15 lakh shares, which is generally meant for the genuine small investors, got a subscription of only 1.23 times. Under this category, the company received only 4490 applications of which, 1,057 applicants accounted for nearly 57 per cent of the amount. Under the book building route, the company had 491 allotees of which, 354 applicants got shares ranging from 300 to 1400. The remaining 119 large applicants, who actually contributed nearly 89 per cent of the non-institutional bidders' portion, should be now holding an average 17000 shares each. For reasons best known to the merchant bankers, the basis of allotment details of this category are not disclosed.

Under the institutional category, just 18 applicants got 22.73 lakh shares at an average of more than 1.26 lakh shares each. Once again, the break-up of the number of applicants from different category of the institutional investors is not disclosed by the company.

Thus, in all, MAL had a public shareholder base of less than 5,000. And, more than a half of the public equity was held by a handful of allottees. Yet, on the first day of listing, the scrip recorded 5937 trades on BSE alone! Same day, it registered 4009 trades on NSE. Was this not an indication of rampant speculation? The scrip, which opened at Rs 220 on BSE, has recovered back after going down to Rs 179 on the first day. But, is the current price justified?

After seventeen long years of existence, MAL had accumulated a surplus of Rs 12.13 crore at the end of 1999. Of this, it gifted Rs 8.24 crore as bonus shares to the promoters early this year thereby leaving out less than Rs 4 crore for the public investors. As against this, it charged an issue premium of Rs 97 crore! During the last five years, it has hardly shown any consistency in its performance. The company's gross income, which was Rs 9.76 crore in fiscal 1996, crashed to just Rs 91 lakh in 1997. Next year, income shot up to Rs 15.13 crore.

But, in fiscal 1999, the company's top line once again crashed to Rs 4.41 crore. In the first nine months of fiscal 2000, income pole-vaulted to Rs 23.76 crore. But, in the quarter ended March 2000, it could not log in more than Rs 92.46 lakh!

In other words, MAL's past performance has always been dependent on the box office performance of the feature films it produced or distributed. As its films' performance varied during the last five years, so did its bottom line. For the nine month period ended December 1999 MAL posted a record profit of Rs 6.57 crore. For the current year ending December 2000, the company is projecting a net profit of Rs 20 crore after providing Rs 7 crore for tax. But, in the first three months, it has earned a pre-tax profit of just Rs 31.77 lakh! Last 12-month profit of Rs 6.89 crore yields an EPS of Rs 3.05 (on a Rs five paid-up share) which is discounted as many as 72 times by the current market price of around Rs 220. Can the high discounting last long? The dismal track record of the companies like AB Corporation and GV Films, floated by high profile film personalities, would certainly advise one to be extremely cautious about the Mukta scrip.

The association of big market operators may, perhaps, give some `mukti' to the scrip in the short run. But, to sustain the tempo for long, the company has to perform. The nature of the company's current business (film production and distribution) and the extremely slow progress of the company's proposed project, surely, do not guaranty any spectacular growth in the near future. No wonder, the company's Rs 100 crore project too has not been appraised by any bank or financial institution!

(Arranged by Investar - The Aarthik News & Research Group) (or) fernando@investaronline.com]