Southern Online Bio plans rights-cum-public issue

Rs 17.1-crore issue to entirely finance company's bio diesel project

City-based Southern Online Bio Technologies Limited is coming out with a Rs 17.1-crore rights-cum-public issue to entirely finance its bio diesel project.

N Satish Kumar, managing director of Southern Online Bio, said that the issue would open by September and UTI had agreed to act as the lead managers to the issue.

The company would also list its shares on the Bombay Stock Exchange (BSE) to create better value for its shareholders. The company is at present listed on the Hyderabad Stock Exchange (HSE) and the Bangalore Stock Exchange (BgSE).

Under the rights-cum-public issue being offered at par, the company would offer 57 lakh shares as the rights which would be subscribed to promoters and their associates. Shares totalling 1.14 crore would be offered to the public, the Southern Online Bio managing director said.

Kumar said that the company would approach Sebi for its approval for the issue next month and also seek an in-principal nod from the BSE for listing. Post-issue, the paid-up capital, which is presently at Rs 5.36 crore, will rise to Rs 22.8 crore.

The authorised capital would rise from Rs 12 crore to Rs 23 crore. The networth will rise from Rs 5.94 crore to Rs 24.43 crore. Promoters have to subscribe to minimum 20 per cent of both rights and public issues. At present, their stake holding in the company stands at 33.3 per cent.

Giving the break-up of the Rs 17.1-crore bio-diesel project, he said that the plant and machinery would cost Rs 9.2 crore, miscellaneous fixed assets Rs 1.32 crore, preliminary operations Rs 2.76 crore and land-cum-civil works Rs 8.57 crore.

The company is setting aside Rs 1.09 crore as the contingency fund and Rs 1.86 crore as margins for working capital. The company has acquired 10 acres at Choutuppal, 50 km from the city, for setting up a plant to produce bio diesel using oil seeds from trees such as pongamia pinnata, jatropha curcas.

"The plant with 30 tonnes per day or 90,000 tonnes per annum capacity would require around 100 tonnes of seeds per day. The annual requirement of seeds is around 32,000 tonnes. As the current availability of seeds in the state is less than 4,000 tonnes, we would use other raw materials like acid oils, distilled fatty acids, animal fatty acids and non-edible vegetable oils like neem, rice brawn etc," Kumar said.

The company is entering into buy-back arrangements with farmers as well as plantation owners to source raw materials. "Irrespective of quality of seeds, they will be procured at Rs 4-4.50 per kg. The commitment is being made to the suppliers," he said.

Satish Kumar said the company was planning to start the works shortly and expects the production to commence by April 2005.

The company had already entered into agreements with buyers like railways, Hyderabad and Visakhapatnam corporations etc. The company had agreed to supply bio diesel at rates cheaper than those of conventional diesel, he said.

Meanwhile, the company recorded a net profit at Rs 4.63 lakh on a total income of Rs 3.1 crore for the year ended March 2004. It earned a net profit of Rs 4.22 lakh on an income of Rs 3.07 crore. The company is the largest B-category internet service provider in the country with its operations mainly in the city.

On the marginal rise in income and profits, Satish Kumar said that the reason was the fall in bandwidth prices which fell to around Rs 10,000 per month per 64 kbps from Rs 14,000.

As the bandwidth procurement prices also slid from Rs 16-18 lakh per mbps to Rs 12-14 lakh, the company had to pass on the benefits to the customers.

It increased its bandwidth from 24 mbps to 36 mbps during 2003-04. Since April, the company had raised its supply capacity by 18 mbps to 54 mbps and would end the financial year with a bandwidth capacity of over 75 mbps, he said.