Mcnally Bharat Engg plans rights issue to fund expansion

Mcnally Bharat Engineering Company (MBEL), the B M Khaitan and C K Birla group-controlled engineering outfit, is planning to raise Rs 14 crore from the market through a 2:1 rights issue.

The proceeds from the issue is likely to be utilised to fund the company's pipeline projects.

According to the market sources the price of the issue is likely to be Rs 15. The board is meeting on December 8 to take a final decision about the offer.

Incidentally, G P Birla, the former co promoter of Mcnally Bharat, has given its entire stake to C K Birla group in a recent deal.

The rights issue has assumed significance as the Mcnally Bharat counter has witnessed more than 1000 per cent rise in last three months.

From a level of Rs 4.57 in August 19 it rose to Rs 44-45 in December. Sources in the market informed that the promoters have increased stake by around 1 per cent through creeping acquisition during the period.

The promoters had around 45.3 per cent stake in Mcnally Bharat as on September 30, 2004. Sources said that it now holds around 46.32 per cent in the company. C K Birla group now holds 24 per cent in the company, while B M Khaitan group holds around 22.2 per cent in MBEL.

There was considerable buying interest in the counter from retail investors too. However, financial institutions have offloaded around 4 per cent during the period.

The chief financial officer of MBEL, P K Ghosh confirmed the rights issue by saying that it would increase the paid up equity by around Rs 9 crore from present level of Rs 19.7 crore to around Rs 28 crore.

"MBEL requires additional working capital for business expansion and it will be funded entire by the rights issue," he said.

Commenting on the sharp increase in the counter in last three months, he said the performance of MBEL has improved dramatically in the current fiscal.

Ghosh is optimistic that the company will register more than 30 per cent growth in turnover in 2004-05 following a upward shift in the scale of activities.

"MBEL is expecting Rs 250 crore turnover from Rs 190 crore in 2003-04. The company is scaling up port handling activities at Haldia, Kangla and Marmagao. Besides, it is executing a mineral processing project for Hindustan Zinc and Balco. MBEL has recently got a big project from PDCL and NTPC," he added.