Asahi Songwon to come out with IPO

Asahi Songwon Colours Ltd (ASCL), the Gujarat-based pigments manufacturer, is entering the capital market on May 15 with a public issue in the price band of Rs 90-108 for equity share of Rs 10 each aggregating to Rs 33.5 crore.

ASCL manufactures CPC blue crude and pigment green having an installed capacity of 3,600 metric tonnes per annum (MTPA) and 1,200 MTPA respectively.

The company has embarked upon an expansion plan at an outlay of Rs 52 crore which is proposed to be part-financed by the proposed IPO.

The expansion would take the CPC blue crude capacity to 10,800 MTPA, set up a 1,200 MTPA pigment beta blue manufacturing facility and a 2 Mw captive power plant.

The company achieved the 100 per cent capacity utilisation last October and the rising demand from its major customers including Clariant, CIBA, Sun Chemicals and Dainippon Ink & Chemicals (DIC). State Bank of India (SBI), the appraiser of the project, has funded the loan of Rs 8 crore for the expansion.

The company has signed an agreement with the Tokyo-based Dainippon Ink & Chemicals, Inc (DIC) for supplying 30-50 per cent of output with expanded capacity for the next three years.

In addition to a supply agreement, the largest ink manufacturer in the world has invested Rs 10.5 crore at Rs 122 per share.

It is presently selling up to 2,000 tonnes of CPC to DIC and Sun of Japan. Clariant already holds a 9.39 per cent stake in Asahi.

The main reason for keenness to pick up a stake in ASCL is to have a cost-effective reliable supplier. It has a 20-acre land at its existing facility in Vadodara and an additional facility will come up at the same location.

According to industry estimate, the market size of CPC blue crude is 40,000 tonne per annum in India. However, the company basically caters to the export market due to high margin gains.

In the domestic market, the volume is high but the margin is low. ASCL's turnover for FY05-06 was Rs 24.5 crore and net profit at Rs 2.6 crore. Unaudited results for the six months of FY06-07 show a turnover of Rs 31 crore and the net profit at Rs 4.6 crore.