Southern Bio floats 2nd public issue

Southern Online Bio Technologies Limited (SBT), an internet service provider (ISP) in Andhra Pradesh, has come out with its second public issue of 1.38 crore equity shares of Rs 10 each for cash at par. The issue, which opened on Wednesday, closes on September 24.

SBT, which is diversifying into the production of biodiesel, also came out with a rights issue of 32.59 lakh equity shares of Rs 10 each at par to the existing shareholders in the ratio of 4 equity shares for 7 shares held. The issue, which opened on September 8, closes on October 7. Post-public issue, the promoters' shareholding would decline from 31.95 per cent to 20 per cent.

The company is establishing a 30-tonne per day biodiesel project at an estimated cost of Rs 17.10 crore in Nalgonda district of Andhra Pradesh. The project is proposed to be funded entirely through the proceeds of the public and rights issue.

SBT came out with an initial public offer (IPO) in 2000. The company, however, could not meet the projections as stated in the IPO offer document. As against the projected turnover of Rs 8.9 crore in 2001, Rs 11.12 crore in 2002 and Rs 13.90 crore in 2003, the company posted a turnover of Rs 3.32 crore, Rs 3.09 crore and Rs 3.07 crore respectively.

Similarly, as against the projected profit after tax (PAT) of Rs 4.16 crore in 2001, Rs 4.74 crore in 2002 and Rs 6.38 crore in 2003, the company posted a PAT of Rs 64.25 lakh, Rs 5.97 lakh and Rs 4.22 lakh respectively. In 2004-05, the company posted a turnover of Rs 4 crore and a PAT of Rs 42 lakh.

Explaining the reasons for the variation promises versus performance, the company promoters had stated that the projections involved setting up of own gateway for providing ISP services. However, the company could not obtain the requisite governmental clearances for setting up the gateway.

Consequently, the company used the gateway of Videsh Sanchar Nigam Limited, which "hampered revenue growth and the ability to offer the services". The company also stated that it could not meet the projections as the overall software market had been in a phase of recession.

There has also been a delay in the implementation of the proposed biodiesel project. The project was earlier slated for commercial production in December 2005.

The commercial production is now expected to commence in March 2006. SBT managing director Satish Kumar, however, stated that there was no cost escalation because of the delay. Implementation of the project was delayed due to delay in the public issue.

Kumar told newspersons here on Wednesday that the company has signed a tripartite agreement with Lurgi Life Science of Germany and Chemical Construction International Private Limited of Delhi for establishing the biodiesel project. Both the companies were responsible for the entire design and construction of the production plant.

He said that the company had also entered into a 25-year buy-back arrangement with the growers of Pongamia and Jatropha biodiesel plants.

SBT had also received a letter of interest from the Indian Railways and the Visakhapatnam Municipal Corporation for supply of biodiesel. The company was in the process of entering into an understanding with the AP State Road Transport Corporation, which was running a bus on biodiesel on an experimental basis.

"We are currently concentrating on large fleet owners. We would like to open two retail outlets, if necessary permissions are given," Kumar added.