Sunshield Chem plans rights issue to fund expansion

Mumbai-based Rs 30 crore Sunshield Chemicals is planning to go in for a rights issue. The issue proceeds will be used to fund capacity expansion at the company's plant at Rasal in Raigad district of Maharashtra.

Satish Kelkar, vice-chairman and managing director, Sunshield Chemicals, said the board would meet on March 4, to take a final decision on the issue. However, the company refused to divulge the ratio of the issue and the outlay for the expansion.

The company is planning to set up a continuous distillation plant to produce alkyl phenols that contain cyanuric acid "" a primary raw material used for manufacturing speciality chemicals "" which it imports from China.

With the backward integration and increased working capital, it now plans to make this chemical locally and, thus, cut input costs substantially.

"The company used to import cyanuric acid from China, but now with the capacity expansion, we can produce the input at our plant," said Kelkar.

The company recently bagged a five-year contract from the German chemical giant Altana Chemie AG to supply electrical enamel insulation material.

The company expects an additional business of Rs 100 crore from the tie-up. The contract involves manufacturing of electrical enamels used for coating copper cables in power transmission.

"The company plans to expand to global markets by exporting its products to the US, Italy and Germany. The order we bagged from Altana will help us in our thrust," Kelkar said.

The Sunshield Chem scrip today closed at Rs 63.5 on the Bombay Stock Exchange, up 4.09 per cent over yesterday's close of Rs 61.

Sunshield is a leading manufacturer of antioxidants and surfactants, and is also working with Altana to develop other products in the same category required for coating mobile and computer circuits. Besides, it manufactures speciality organic chemicals.

The company's gross sales increased to Rs 752.9 crore for the quarter ended December 2005 from Rs 534.1 crore recorded in the previous corresponding quarter. It posted a net profit of Rs 28.7 crore for the same quarter vis-a-vis a loss of Rs 5.4 crore.

Sunshield Chemicals had, in 1993, acquired the entire manufacturing facilities of Dimple Chemicals & Services and, in September 1994, completed merger of Alsuan Chemical Corporation and Kamal Chemicals Industries.