Boc Prospectus Mentions Sapru Cases As Risk Factor
BOC India Ltd, the industrial gases major, has mentioned the ongoing cases against the company's chairman J N Sapru as a risk factor in its draft letter of offer for the proposed 4:5 rights issue of the company.
The draft letter of offer says that central excise cases and criminal proceedings are pending against Sapru in different courts and tribunals, relating to his tenure at ITC Ltd.
Also, while these cases are being contested by Sapru, recovery of penalty and short payment of duty aggregating Rs 75 lakh arising out of these cases have been stayed by the courts.
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The management claims, however, that these cases pending against Sapru will not have any impact on operations and future performance of BOC India.
The rights offer of 2.18 crore equity shares of Rs 10 each at a premium of Rs 50 per share aggregating Rs 130.9 crore will be lead managed by ICICI Securities and Finance Co Ltd and Jardine Fleming India Securities Ltd, while Citibank NA (Calcutta) will be the banker to the issue.
At present, The BOC Group plc holds 51 per cent of the total equity capital.
The next largest shareholder is Unit Trust of India with 7.99 per cent equity share. The BOC Group plc proposes to subscribe fully to their rights entitlement and will also subscribe to all unsubscribed portion if any, to the rights issue.
That is, they will acquire additional shares beyond their entitlement and has already obtained approval to increase their stake in BOC India from the present 51 per cent to a maximum of 74 per cent.
The company has declared that Rs 80.14 crore of the capital mopped up from the Rs 130.9 crore issue will be used to part finance the ongoing 1290 tonnes per day industrial gases plant at Jamshedpur.
Another Rs 50.76 crore will be used for normal capital expenditure, repayment of term loans and working capital requirements of the company.
The total project cost is Rs 220.14 crore out of which Rs 140 crore will be funded by taking term loan. ICICI has sanctioned Rs 100 crore at an interest rate which is 3 per cent above ICICI's advance rate plus interest tax as applicable. The company has applied to various financial institutions for the remaining Rs 40 crore loan.
BOC has declared in its offer document that the project will start commercial production by April 1998.
The internal risk factors mentioned in the offer document, however, points out that BOC is yet to place orders for a part of the plant and machinery, that any delay in the project may have an adverse effect on the company profitability and that claims against the company in respect of tax, duties, etc amounting to Rs 8.2 crore have not been provided for.