Message In A Bottle

Issue size : Rs 10.53 crore

Price : Rs 85 per FCD

Opens on : September 26,1996

Listing at : Bangalore, Mumbai, Calcutta, Delhi, Madras

Lead Managers : IFCI and Llyods Finance

The projects being undertaken by the company are sound, but considering the market conditions, it is better to

buy later.

The quality and amount of disclosures made in prospectus of Victory Glass and Industries is remarkable. The company is expanding the capacity of its glass bottle manufacturing plant from 31,000 tpa to 36,500 tpa. It is also setting up a wind power project (2.025 mw) in Karnataka and PET bottle manufacturing capacity (22 million bottles p.a.) in Goa. The project cost is Rs 27.2 crore. Term loan from IFCI is Rs 8.2 crore, internal accruals Rs 2.25 crore and rest is equity funded.

 

The face value of FCDs is Rs 85. Part A of Rs 40 will be converted into one equity share on allotment and Part B of Rs 45 will also be converted into one equity share on April 1, 1997 (equity for 1996-97 will not be shown as fully diluted).

The PET bottle project, delayed by 8 months is expected to start commercial production in March 1997. The management claims the reason for delay is delay in the rights cum public issue.

The pet bottle project is sound. Firstly, instead of using Indian or Korean moulds, it is using Japanese moulds which are longer lasting and are of better quality. Secondly, the availability of bottle grade pet chips(the raw material) is not a problem. Thirdly, though the three existing players are expanding capacity, (Pearl Polymers, Padmini Polymers and Jauss Polymer are also in the process of expanding capacities) and one more unit is going on stream, the capacity creation is not a problem. The reason being that, in India, PVC is used for packaging mineral water. PVC is a toxic material and globally, it is compulsary to use PET products for mineral water.

The main market for glass bottles is liquor and is unlikely to be affected because of resale value of glass bottles.

Considering the current market condition, it is better to buy when the price declines post issue.