High debt component is a bane for Intron

To augment longterm working capital requirements, Intron Ltd is coming out with a Rs 16.27 crore rights issue. The 1:1 offer at par comes at...

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To augment longterm working capital requirements, Intron Ltd is coming out with a Rs 16.27 crore rights issue. The 1:1 offer at par comes at a time when the Intron scrip on the Bombay Stock Exchange is quoting below par. AB Electrolux (ABE), the Swedish white goods major which holds 51 per cent stake in the company, has expressed its willingness to pick up the additional equity over and above its current rights entitlements, upto a maximum limit of 74.21 per cent.

Although incorporated in 1973, the company started commercial production only in 1989 and changed its name six times. Since 1992, Intron has been suffering losses. The company’s accumulated losses (as on March 31, 1997) at Rs 24.26 crore has fully eroded its net worth.

For fiscal 1998, Intron incurred a loss of Rs 4.47 crore from a total sales of Rs 6.03 crore. The loss comes despite an estimated Rs 1.77 crore from other income. Estimated accumulated loss till the year ended March, 1998 is close to Rs 29 crore.

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As per the company, the reasonsfor this dismal performance are manifold. It has a high import component which calls for a high rate of duty, and there was low capacity utilisation at its production facility. These apart, the company had to establish itself in a highly competitive market which resulted into large financial outlay.

Also, during the last few years the company was under tremendous pressure to pay back the loans and advances it had availed from IFCI, Canara Bank and State Bank of Travancore. These loans were ultimately settled by Intron through one-time-settlement arrangement with these creditors.

Between April, 1994 and October, 1995, the company had to close down production. Naturally, the financial projections made during its IPO went haywire. After ABE was inducted into Intro as the principal shareholder, stabilization seemed a close possibility. However, the 4 per cent additional special duty proposed in the 1998 budget could hurt its revival course.

Also, during fiscals 1999 and 2000 Intron’s bottomline would befurther stretched as it has to pay back the US$ 3 million loan taken from ABE.To part finance its washing machines manufacturing facility, in 1992 Intron had come out with its maiden public offer of Rs 3.90 crore. However, the company had suffered cost over-run to the tune of Rs 2.20 crore and time over-run of 13 months.

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The company manufactures fully automatic front loading washing machines and faces stiff competition from the other established players in the sector. Maharaja International Ltd, a group company of Intron has also been incurring losses for the last few fiscals and as of March 31, 1997, its accumulated losses were more than 50 per cent of its net worth.

Intron has an distribution arrangement with Maharaja Intl for the distribution of the washing machines manufactured by the former. Even after adjusting for the present issue, the debt-equity ratio would stand at a high of 5.11.

The shares of the company are listed on the stock exchanges at Bombay and Delhi. The offer, lead managed by IndGlobal Financial Trust Ltd, opens on July 8 and closes on August 6.