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Friday, Sep 20, 2002

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Corporate - Preferential Allotments

Nagarjuna Agrichem pref allotment to group co

Ch. Prashanth Reddy
C.R. Sukumar


NAGARJUNA Agrichem Ltd (NAL) proposes to issue 45.55 lakh equity shares of Rs 10 each on a preferential basis to Vijayalakshmi Insecticides and Pesticides Ltd (VIPL) at a price of Rs 16.15 per share, which is 25 per cent more than the Rs 12.90 per share determined in accordance to existing Securities and Exchange Board of India guidelines relating to preferential issues.

The Hyderabad-based Nagarjuna group has promoted both the companies though NAL is a public limited company and VIPL is privately owned enterprise. NAL owes VIPL an amount of Rs 7.35 crore. In lieu of this amount, NAL proposes to issue equity shares on a preferential basis.

VIPL, from time to time, has extended trade advances to NAL and an amount Rs 3.95 crore is outstanding and payable to it. Besides, NAL has to pay Rs 3.39 crore to VIPL towards the purchase of the latter's undertaking comprising the business of manufacture and sale of Phorate-G, an insecticide claimed to be having wide applications and good sales margin.

Following the issue of preferential shares, the promoters' holding in NAL will increase from 74.57 per cent to 81.25 per cent and the non-promoters' holding will decline from 25.40 per cent to 18.73 per cent. The stake of VIPL, owned by promoters, in the equity of NAL will be 26.25 per cent.

NAL officials told Business Line that the proposed issue of preferential shares would help improve the revenues and profitability of the company and reduce its net debt burden. By adding Phorate-G to its product line, NAL was expected to increase its turnover by Rs 12 crore and augment its profit by two per cent per annum. Last fiscal, NAL had posted a turnover of Rs 102.78 crore and net profit of Rs 8.05 crore.

According to the company officials, NAL has targeted to achieve a turnover of Rs 500 crore per annum during next three years period. Hence, it is not only diversifying into profitable areas of business but also expanding its product line. Acquisition of Phorate-G manufacturing and marketing business is a part of this strategy.

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