Ink manufacturer DIC India’s decision to issue rights shares at Rs 225 each has turned off shareholders. The scrip, despite a bull market, has dropped from Rs 217 to Rs 194 over a period of three months. The aggressive pricing, analysts believe, will help the Japanese promoters hike their stake in the company.
The DIC India board on Thursday announced that its rights issue committee has decided that the price at which the rights shares will be issued has been fixed at Rs 225. On Thursday, the scrip remained flat after opening at Rs 195, an increase of Rs 9.45 over Wednesday’s close of Rs 185.95.
Since the announcement of the company’s intention to go for a rights issue of 22,95,179 shares on a 1:3 basis in April, the scrip moved up from Rs 190 to a 52-week high of Rs 217 during early August, before cooling down to the present level.
The price movement reflects a marginal growth in the company’s bottom line during the June-ending quarter to Rs 2.61 crore, from the year-ago period’s Rs 2.43 crore.
With the current price ruling at a discount to the issue price, shareholders of the Kolkata-based Indian subsidiary of $9-billion Dainippon Ink and Chemicals of Japan have voiced their reluctance to subscribe to the offer.
“We believe the rights issue is nothing but a preference share issue systematically done to hike the Japanese parent’s stake in the company,” a Mumbai-based shareholder said.
The company management said the issue price has been arrived at after considering the intrinsic value of the company and its track record.
The parent company, the largest printing ink maker in the world, has decided to pick up the unsubscribed portion of the rights issue.
Dainippon has agreed not to de-list the company, which is now planning to set up a state-of-the-art liquid ink plant at Noida, while its news black ink making capacities in Ahmedabad are being enhanced.