The Hindu Business Line : Kilburn Engineering: Invest

The pick up in demand for its products and the steady improvement in operating profits over the past couple of years and the recent turnaround of the company indicate that the worst could be over.

The push given to the food processing industry — a dominant user — in the Budget could keep up demand for the company's products.

Though reasons for the rights issue are not convincing, the pricing of the issue is attractive.

Bright prospects

The rights issue at Rs 25 per share is priced at six times its trailing 12-month per share earnings.

We believe the company's business prospects appear better.

The company makes various types of dryers used in process industries, such as chemicals, oil and gas, tea, FMCGs (fast moving consumer goods) and food processing. With the pick up in most user industries, the demand has grown as is evident from the improved turnover over the past few quarters.

The revenue for December 2005 has halved compared to the corresponding previous period. The revenues of a capital goods company are, however, order-and-delivery driven and can fluctuate from quarter to quarter.

Progress report

Kilburn Engineering has entered into tie-ups with international firms for certain products and has an impressive client list. Foreign orders, too, have picked up and the company exports 40 per cent of its production.

The company is focusing on the food processing industry. The company is in the midst of restructuring and has been reporting an improvement in operating profits over the last couple of years.

The company has land in Bhandup (a Mumbai suburb) worth Rs 50 crore. The company plans to relocate its manufacturing plant to another place and sell the land to finance its expansion. The current offer is primarily to allot equity shares to promoters for the advance given by them to repay some loans last year.

Offer details

Kilburn Engineering plans to raise Rs 16.9 crore by issue of shares on a rights basis in the ratio of one for every share held. Rs 8.25 crore from the rights issue will be adjusted against advance received from promoters for settling loans.

The rest of the funds raised will be used to construct a temporary shed to optimise the current capacity, implement an ERP package, buy capital equipment and repay sales tax loans and dues. IDBI Capital Market Services is the lead manager. The offer closes March 21.

More Stories on : Rights Issue | Recommendation | Engineering

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page