Maha Glass & Agro
Maharashtra Glass & Agro (a subsidiary of Sekurit Saint Gobain, France) is floating a rights issue to strengthen its market position, and eventually enable it to start generating profits. It expects to start making profits at the operating level in the current year, and has projected a PBDIT of Rs 81 lakh compared with the operating loss of Rs 1.68 crore in the previous year.
The company, whose name is being changed to Sekurit Saint-Gobain India, makes automotive glasses being supplied to OEMs. Though the company's past is uninspiring, a source of comfort is the foreign promoter's willingness to hike its stake with an eye on the future.
It has taken government approval to hike its stake up to 80.4 per cent in the subsidiary to take care of the unsubscribed portion.
The Rs 19.52 crore rights is being issued at par in the ratio of three for every two shares held. Considering that the current market price is Rs 9, the issue is unlikely to generate much interest, and a hike in the promoters' stake seems inevitable. One objective of the issue is to reduce its debt burden, and it will be repaying Rs 5.2 crore out of its total debt of Rs 24 crore. The company has an interest burden of nearly Rs 5 crore which will be lowered to some extent after the company pays back some debt.
It is investing nearly Rs 10 crore in a new project to make 24 lakh units of toughened safety glass, and the balance proceeds are being used to improve its existing facilities by adding certain machinery. Both the modernisation and expansion plans will start operations in June, 1999, and the benefits will start flowing in only in 1999-2000. Its present capacity of laminated safety glass is 4.2 lakh units, flat toughened glass at 3 lakh sq.mts and bend tempered glasses is 4 lakh units per annum.
The estimated size of the automotive market is Rs 250 crore out of which Maharashtra Glass accounts for only 10 per cent. Its capacity is relatively lower compared to that of its main competitor in high technology automotive glasses.
To augment demand from foreign car companies in the country, it has imported a machine which will enable it to supply curved glasses for new models.
The company expects to capitalise on the long-term relationship that its parent has with European and American manufacturers to capture a higher marketshare. The new project will enable it to offer the full set of automotive glasses.
It is, however, too premature to expect performance to improve immediately. For one, the benefits of capacity expansion will be available only in 1999-2000. Moreover, a recovery in the automobile industry is nowhere in sight, and new passenger car sales growth rates are also headed south.