Motul Mafatlal Fails To Break The Jinx, Posts Losses Again

This will be the company's third loss in a row after starting operations in August 1993. In its first year, Motul Mafatlal made a Rs 69-lakh loss on a turnover of Rs 36.9 crore.

The next year, it managed to cut losses to Rs 12 lakhs as turnover jumped to Rs 26.87 crore.

For 1995-96, however, the company has forecast a gloomy picture with sales dropping by 27 per cent, and production by 51 per cent.

The loss is expected to increase to Rs 1.63 crore as the turnover drops to Rs 15.7 crore.

According to the company, competition in the lube market has forced it to offer discounts and rebates to hike sales , thereby putting pressure on margins.

 

Expenditure is likely to increase with the rise in staff costs by 24 per cent and interest costs by 47 per cent.

To shore up its networth, now at a perilous Rs 1.27 crore, the company is offering Rs 7.8 crore worth of equity shares on a rights basis of 3:2 at a premium of Rs 3 per share.

The money raised will partly meet working capital requirements, but a substantial portion of Rs 4.20 crore, will be used to repay unsecured loans taken from banks and promoters.

This is Motul's second foray into capital market in two years. In 1994, the company had made an IPO of Rs 1.20 crore. As per the prospectus, the company was to use the this money to set up a lube manufacturing unit of 15,000 kilolitres per annum.

This was not done and the entire amount of Rs four crore, which included Rs 2.8 crore from promoters, was used to advertise the Motul brand, give longer credit periods and discounts.

Motul Mafatlal, which markets automotive and industrial lubricants, is competing with about 22 lube companies in India.

Industry sources claim the company has yet to establish itself in the fiercely competitive 950,000-tonne Indian market with annual sales of Rs 3,300 crore.