Any downturn in the fortunes of the promoter company would hit the profitability of VAL.

In addition, as a producer of just one product, acrylic fibre (a favoured wool substitute), leaves the company at a disadvantage in an industry which is cyclical in nature.

The demand for the fibre is closely linked to that for synthetic textiles.

The company is hopeful of an economic revival leading to an expansion in the disposable income of the middle- and upper-middle classes both in the urban and rural areas.

However, this optimism is clouded by the company's susceptiblity to change in consumer preferences, from synthetic goods to natural materials such as wool.

At present, the anti-dumping duties levied are keeping the imports at bay. However, with India being a WTO signatory, the base Customs duty is likely to be reduced over the next three years, leading to lower realisation and stiffer competition for the company.

Considering these factors, investors need not participate in the book-building process.

The offer is primarily to disinvest the 2.7-lakh shares (62.2 per cent equity stake) held by Mahavir Spinning Mills. Post-offer, the stake would get reduced to 37.2 per cent.

The floor price for the offer is Rs 10. At this price, the stock trades at a price earnings multiple of 11 times its 2002-03 earnings.

The offer opens on September 15and closes on September 19. The lead manager for this offer is ICICI Securities.

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