Date:01/07/2005 URL: http://www.thehindubusinessline.com/2005/07/01/stories/2005070102851500.htm

Back DEG starts mopping up of Agro Dutch Ind stocks

Jayanta Mallick

Kolkata , June 30

THE stock of Agro Dutch, reportedly world's second largest integrated producer and exporter of mushrooms, has begun to see strong mop-up based activity on the bourses.

According to market sources, DEG, the investment institution for the Federal Government of Germany, has begun buying the stock. Sources involved in the exercise said that two locally present broking outfits are understood to have been engaged.

The targeted acquisition is around 7 per cent of the paid-up capital of the company of Rs 14.78 crore. The average acquisition price has been fixed at Rs 90 a share.

The sources further mentioned that one of the designated brokers has begun buying operations on Wednesday, when the stock hit the upper circuit at Rs 62.50. Today, the stock touched its 52-week high at Rs 68.50, after opening at Rs 64.35 on the BSE, but finished at Rs 60.95. Over 20 lakh shares have changed hands on the BSE alone.

Market sources pointed out that in the context of the company's proposal for a 1:1 rights issue at a premium of Rs 20 per share of Rs 10 each, the estimated 7 per cent acquisition will eventually remain below the 15 per cent threshold for triggering the takeover code.

The representatives of DEG had visited the company's plant in Dera Bassi near Chandigarh last week before putting through the final buy-call.

According to Mr Ashish Kapoor of Anagram Stockbroking, the company is expanding its capacity to 50,000 tpa from the current level of 36,000 tpa.

According to the analysts, around 67 per cent non-promoter holding in the company makes such market operations easier.

Fundamentally, the stock appears to be on a strong wicket with 04-05 net profits at Rs 11.89 crore and reserves of over Rs 71.35 crore. The March 31, 2005 EPS stood at Rs 12.11.

The recent developments in the overseas market in terms of tariff barriers have also been positive, indicating possibility of further improvement in the profitability of the company.

Agro Dutch has been slotted in the low anti-dumping duty bracket of just 0.62 per cent by the US Department of Commerce recently for the review period between February 1, 2002 and January 31, 2004. This marks a substantial reduction in the tariff barrier (from 33.47 per cent as was effective last fiscal) and greater market access. It is estimated that it will generate an additional cash of Rs 5.10 crore during the current fiscal for the company.

During 2004-05, the company had earmarked Rs 6.94 crore for the anti-dumping duty alone. Further, Mexico has initiated proceedings for clamping anti-dumping duties on Chinese imports of canned mushrooms. The Mexican importers, who buy mushrooms worth around $20 million from Chinese suppliers annually, have reportedly begun enquiries for sourcing from Agro Dutch for easy open end canned products.