Opto Circuits to use rights issue proceeds for retiring high cost debt

The company intends to use rights issue proceeds to retire part of its high-cost short-term borrowings

Bangalore-based Opto Circuits (India) Ltd, a manufacturer of medical devices, which has been under intense pressure following its worst financial performance in the fourth quarter last year and working capital shortage, is planning to launch a rights issue to raise funds to tide over the crisis.

The company, which is also facing high debt on its books, intends to use the rights issue proceeds to retire part of its high-cost short-term borrowings, analysts tracking the company said.

Opto’s senior management officials were unavailable for comments.

The company, on Monday, announced that it will come out with a rights issue and the board will take a call on the timing next week when it meets to take on record financial results for the first quarter ended June 30, 2013.

Currently, the company’s net debt stands at Rs 1,407.6 crore as against Rs 998 crore in the previous year, an increase of 41 per cent.

Vinod Ramnani, chairman and managing director, Opto Circuits, had earlier said the company would sort out the working capital issue in 2-4 quarters.

Opto Circuits’ consolidated net profit nosedived 94.12 per cent in the fourth quarter ended March 2013 to Rs 12.29 crore as against a consolidated net profit of Rs 209.34 crore in the same quarter a year ago.

Net sales for the quarter declined 31.1 per cent to Rs 456.8 crore compared with Rs 662.7 crore in the year ago period. Operating profit declined by 5.1 times to Rs 28.7 crore as against Rs 149.8 crore.

Lower sales combined with high interest pay out on account of debt servicing has impacted it during the quarter.