Srf Rights Issue Early Next Year

SRF has projected a drop in its net profit for the current financial year to Rs 3.5-4 crore from a Rs 14.66 crore profit after tax for the year-ended March 31. The company has already reported an over 90 per cent drop in its net profit for the first half of this year from Rs 7.61 crore to Rs 50 lakh.

The company, which has an interest burden of Rs 127 crore for 1997-98 on Rs 576 crore worth of loans by March, has initiated a financial restructuring through which it hopes to reduce interest costs by over 30 per cent at the rate of Rs 42 crore a year.

 

However, the actual impact of the restructuring on the bottomline will be felt only next year, said managing director Ravi K Sinha at a press conference in New Delhi yesterday.

The average cost of funds is expected to come down from 22 per cent rate to 16 per cent as a result of the restructuring, he added. The company is targeting a 20 per cent growth in earnings per share and over 20 per cent return on net worth from the year post-retsructuring.

As part of its financial initiatives the company is planning a 3:5 rights issue next year of Rs 50 crore and expects to submit the offer document to the Sebi this week.

The lead manager to the issue ENAM Financial Consultants has identified a price band of Rs 18-21 per share of SRF including premium for the issue within which the company will choose its price before approaching the market.

As a result of the proposed rights issue, the equity capital of the company will rise from Rs 39.7 crore to Rs 64 crore. The post-rights public holding is expected to come down from 42 per cent to 33 per cent. The promoters stake is expected to rise from 17 per cent to 22 per cent and of the financial institution from 41 er cent to 45 per cent.

The company has alreday obtained a $30 million ECB approval from the ministry of finance for which underwriting commitments have been obtained from ICICI and IFCI.

The Rs 687-crore SRF Ltd, reeling under a heavy interest burden after the takeover of Ceat Nylon tyre code plant, is also planning to mop up another Rs 30 crore either through private placement or through sales of assets.

The company is planning to get out of its opthalmic lenses and polyester films business intitially through a joint venture and subsequently through a total sell out.

The company has already identified a multinational partner for its opthalmic lenses business and is in the midst of serious talks. An international accountant firm is currently evaluating the assets of the business.