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Mumbai March 7 The Ahmedabad-based edible oil company Vimal Oil & Foods Ltd will be tapping the market with a follow-on public and rights issues to part-finance diversification into snacks and food processing.

The follow-on public issue of 99.66 lakh equity shares with a face value of Rs 10 has been priced at a premium of Rs 20 per share, while the rights issue of 27.30 lakh equity shares will be offered at Rs 25 (a premium of Rs 15 per share). The rights issue will be in the ratio of 3 equity shares for every five shares held.

The public issue opens on March 14 and closes on March 23. The company's stock on the BSE gained sharply by 5.45 per cent at Rs 37.75 on Wednesday against the previous day close of Rs 35.80.

The promoters, who are now holding 28 per cent in the company, will infuse Rs 10 crore through the rights issue to lift their stake to 36 per cent. Total cost of the new plant being set up in Mehsana, Gujarat for producing potato chips and other fried food varieties has been estimated at Rs 42 crore.

The company will be raising Rs 35 crore through the equity-cum-rights issue. Indian Bank has extended a term loan of Rs 5 crore and the promoters will be investing Rs 2 crore (apart from the rights issue) in the project. The new plant will be operational by December.

Mr Jayesh Patel, CMD, Vimal Oil & Foods Ltd said: "the Rs 16,000-crore snacks and food processing business is growing at the rate of 20 per cent per annum".

He added: "With our focus on quality and 950 strong distribution channels we will be able to make our presence felt in the first one year of operations. There is enough room for everyone to co-exist." Vimal Oils & Foods Ltd is expecting a 10-15 per cent profit margin from the new venture.

The cut in customs duty to 5 per cent from 7.5 per cent on machinery imports by food processing industry will help the company cut project cost. The company will be importing 50 per cent of the machinery from Italy and US.

More Stories on : Public Offer | Oilseeds & Edible Oil | Rights Issue

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