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Reshma Krishnan

JIK INDUSTRIES is offering 46.8 lakh cumulative convertible preference shares with a dividend of 12.75 per cent at a face value of Rs 100 each, with detachable warrants. This offer is on a rights basis to the company's equity shareholders in the ratio of three preference shares for every 25 equity shares held as on December 24, 2001. The offer opens on February 11, 2002 and closes on March 13, 2002.

The entitlement is as follows. Say, you held 100 shares as on December 24, 2001. You are then entitled to 12 preference shares in the rights offer, along with four detachable warrants. The preference shares will carry a dividend of 12.75 per cent payable on completion of 12 months from the date of allotment. After this, they will be converted in the ratio of ten equity shares for every three preference shares, at a conversion price of Rs 30 each. Therefore, you will hold 40 shares that cost Rs 300. There is the option of converting the detachable warrants at the ratio of ten equity shares for every warrant, at a price of Rs 18 each.

Therefore, if you exercise the warrant at the end of a year you will have 80 equity shares that cost an average of Rs 24 each.

JIK Industries is a diversified company in the business of lead free crystal manufacturing, chemical waste recycling, money changing and transfer service — forex and distribution. The object of the issue is to set up offices-cum-display galleries, showrooms, godowns and augment the working capital resources of its existing activities.

For the 15-month period ending December 2001, sales stood at Rs 203.08 crore, up 9.2 per cent. Operating margins stood at 9.5 per cent. The company's diversified business profile enhances the uncertainty associated with its earnings stream. Its foreign exchange division contributes to almost half of its revenue and has seen negative growth in the past year.

The driver of growth has been the chemicals waste recycling division that has grown almost 300 per cent since 1998.

But the uncertain nature of the forex business creates problems for the company's future growth. The company's businesses have to find a direction, before any further investment can be made.

Earnings per share for the period ended 15 months as of December 2001 stand at Rs 2.51, a sharp fall from Rs 9.71 per share for the 15-month period ended September 2000.

The stock is frequently traded, but subject to bouts of speculative activity. Investors can avoid the issue.

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