Falcon Drops Rights, Goes For Pref Float

The M R Chhabria promoted Falcon Tyres, based in Mysore, has shelved plans for its rights issue, and has, instead, decided to hike the promoters' stake by going in for a preferential issue.

The rights issue proposal was cleared at the company's board meeting held on June 19. However, in the latest development, the company has decided to come out with an `alternative option' of a preferential issue.

Under the new scheme, the board of Falcon Tyres has decided to issue 15,63,125 equity shares at a price of Rs 16 per share on a preferential basis to the promoter company and its associates and subsidiaries.

 

The company is now awaiting necessary clearances from the Securities and Exchange Board of India (Sebi) for its proposal to peg the price at Rs 16 per share.

The alternative plan was the result of the company's latest meeting held on July 22. The company reasoned that "such further issue of capital is required to meet the additional working capital requirement for expanding the activities of the company."

Earlier, FTL had proposed to come out with a rights issue in the ratio of 1:2 at a premium of Rs six per share.

Presently, the paid-up capital of the company is Rs 23 crore which is divided into 2.35 crore equity shares of Rs 10 each.

The paid-up share capital, after the proposed rights issue, was to be well within the limit of the present authorised capital of the company.

The company is now on its way of implementing its plan for hiking its production capacity in respect of two and three wheeler tyres from three lakh to 3.5 lakh tyres per month. The expansion plan is expected to be completed by March, 1999.

Falcon Tyres is also eyeing the production of cycle and farm tyres to cater to the needs of the rural sector.

The company has declared a dividend of Rs 2.2 per equity share for the last fiscal.

FTL had clocked a turnover of Rs 98 crore in 1997-98 as compared to Rs 85 crore during the previous year inspite of the recession in the automobile industry.