J & N Trading Volumes Erratic

The company's rights issue was open from September 11, 1996 to October 11. Around this period, the scrip improved from Rs 40 before the issue to Rs 60 as on November 18, an appreciation of 50 per cent. Over the same period, the BSE Sensex moved down from 3434 to 3171, a fall of 7 per cent. Prior to this uptrend, the J&N scrip had declined from around the Rs 70 level in April 1996, a month during which the Sensex was around the 3400 level.

Nor was only the price behaviour peculiar. Volumes in the scrip flared twice. Usual daily volume in the scrip is less than 500. On October 9, 10, and 11, the last days for the rights issue, volumes increased to 5900, 8700 and 12,800 respectively. But later, according to the ASA charts, volumes in the scrip rocketed up to over 40,000 on November 1, 4 and 5. Heavy buying in the scrip is indicated, which has led to the assumption that someone has been trying to corner J&N shares.

 

Will investors be aggrieved by the cancellation of allotment? Certainly, and it is not clear what will happen to those who had sold at the lower ex-rights price.

But while the other investors may have subscribed to the rights issue, fully convinced about the company's projections, they may have second thoughts about the issue now.

J&N had projected profits before tax of Rs 5.50 crore for the current financial year in its rights issue offer, compared to a PBT of Rs 4.07 crore last fiscal. But the company's first half results show that profits before tax amounted to only Rs 0.69 crore, and reaching the projected figure of Rs 5.50 crore promises to be a tall order.

Furthermore, with the rights issue shelved, the instacolor project, for which the rights issue was being made, will probably be deferred. In the circumstances, a further slide in the company's profits this year is likely. As on March 31 this year, the company's total outside liabilities amounted to 3.33 times net worth, excluding revaluation reserves. Accessing further loans may not be promising, particularly as it would further increase burgeoning interest costs.