The Hindu Business Line : Dagger-Forst Tools in talks with 3 cos for stake sale

"We are in talks with three companies and may arrive at some decision by the end of this month," Mr G.L. Lath, Joint President, Dagger-Forst Tools Ltd. The promoters hold about 69 per cent stake in the company. Forst and Samputensili hold 4 per cent each.

The company is looking for a spike in its earnings and believes that offering stake to global players could push it to a trajectory of growth. Some of the leading international companies in this business include Gleeson of the US, Nachi of Japan, Forst and Samputensili.

Dagger-Forst, which ended the March 2005 quarter with a net profit of Rs 25.82 lakh (Rs 34.72 lakh) on sales of Rs 7.84 crore (Rs 6.93 crore), is also overwhelmed by the growing domestic demand for precision tools.

The company is in the process of expanding its capacity to cater to the growing demand from the automobile industry. It is setting up a plant at a cost of Rs 20 crore in Gandhidham in Kutch district of Gujarat.

Dagger-Forst has had an exposure to the export market but finds the domestic market too strong to resist. "There is potential to grow exports but the indigenous market is also growing. The capacity strain is showing. Therefore, we have decided to go in for capacity expansion," Mr Lath said.

Funds for the capacity expansion would be met through various methods - offering a stake to global companies is one of them. A rights issue or a public issue are other options being looked at by the company. The board of the company is slated to meet later this month to decide on various options, Mr Lath said.

The company would need funds for its expansion plans. This plant is expected to commence production by December 2005.

However, Dagger-Forst's accounts of 2005/2006 (July-June) would only reflect part of this expansion. "By June 2008 the full effect of this expansion will show up in our accounts as capacity utilisation would touch 100 per cent then," he said.

Margins have been edging up as the company has been able to pass on input cost increases to its users, mainly auto sector.

In the last one month, the share prices have risen by 43 per cent to Rs 63.40 on the Bombay Stock Exchange.

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