Dewan Sugars

However, a boom inevitably results in promoters with an unimpressive track record raising money from the capital markets. Dewan Sugars is trying to cash on the wave in the sugar sector and put up a 2,500-tonne-cane-crushing capacity-per-day (tcd) sugar unit.

The group has a reputation for frequently going public and has raised about Rs 100 crore from the market in the last three years. Till late, Dewan Sugars was providing industrial consultancy and financial services. It has now discontinued its consultancy business to focus on the sugar project.

Apart from the weak reputation of the promoters, the project itself is of a very small size. Though it will have the advantage that new units have of selling its entire production in the free market in the first nine years of commercial production, its size will not enable it to compete effectively with larger units.

 

Smaller players like Tulsipur, which has a capacity of 2,500 tcd, have not been able to cash in on the favourable price trends. Even as sugar prices rose due to a lower sugar output in 1996-97, the surplus from the previous seasons caused a supply overhang. The sharp swings in fortunes have forced players to look at exit options.

Dewan Sugars is now raising Rs 27.25 crore through a rights-cum-public issue, with the public issue portion comprising 18.28 lakh unsecured fully-convertible debentures of face value of Rs 100 each at an interest rate of 18 per cent. After seventeen months, it will get converted compulsorily into ten equity shares of Rs 10 each.

The stock listed on Delhi and Kanpur stock exchanges slipped from high of Rs 54.50 in 1995 to Rs 34.13 in 1997. Moreover, the stock is highly illiquid with no deals reported in two months.