Gulf Oil's rights issue likely in Dec

To raise Rs 80 crore for working capital requirements

Gulf Oil Corporation Limited (GOCL), a Hinduja Group company, is planning to come out with a 3:1 (three shares for every share held) rights issue in December, this year, to raise Rs 80 crore to support its working capital requirements.

The company has submitted the proposal to the Securities and Exchange Board of India and is awaiting its approval, according to managing director, Subhas Pramanik.

Over the last three years, he said, the business of the company had increased significantly and it had been funding the working capital requirements through debt financing apart from internal accruals. The rights issue was aimed at injecting liquidity into the system, reducing borrowings for working capital requirements, funding non-project capital expenditure and repayment of high cost loans. The company’s debt at present stands at Rs 300 crore.

GOCL shareholders have also adopted a resolution enabling the company to raise up to $ 100 million (Rs 450 crore) through issue of foreign currency convertible bonds (FCCBs), American depository receipts (ADRs) or global depository receipts (GDRs). Pramanik said this amount, if raised, would be utilised to augment long-term financial resources of the company and to meet the costs of its expansion and diversification projects.

GOCL reported a net profit of Rs 12.27 crore for the quarter ended September 30, 2009, as against a net loss of Rs 98 lakh incurred during the same period last year. Its turnover during the quarter increased marginally by 1.3 per cent to Rs 229 crore from Rs 226 crore posted in the Q2 of last year.

During the second quarter, the company gained Rs 17.13 lakh from restatement of foreign currency assets while it incurred a loss of Rs 5.67 crore on this account in the Q2 of last year. GOCL stated that launch of new lubricants, undertaking customised promotions, higher sales of explosives and expansion of activities in the iron ore mining area contributed to the turnaround of the company.

Pramanik told mediapersons here on Monday that the raw material cost of explosives had declined. Particularly, the cost of ammonium nitrate, the main ingredient of the explosives, declined substantially from $430- 470 a tonne in the second quarter of last year to $230-250 during the quarter under consideration. This resulted in realisation of better margins in the explosives division. Similarly, the lubricants division too realised better margins than last year.

GOCL, which has a land bank of around 2,000 acres spread over Tier I and Tier II in the country, envisages that its property development division will be a significant contributor to the company's revenues in future. The company is currently developing a 40-acre site at Yelahanka in Bangalore comprising 10 acres of commercial space and a 30-acre IT/ITeS special economic zone.

Plans are also afoot to develop 100 acres out of the company's 800-acre land in Hyderabad into commercial, residential and research blocks. It intends to develop a knowledge park at the place. “ We will be constructing an area of 12 million sft in Hyderabad. The ground-breaking is likely to take place next year and it will take another five years for the completion of the project,” Pramanik said.