MBAP; Expanding For Good

As the government seriously took to reforms, the markets responded well and started inching upwards. Market participants started thinking on how best to reap the benefits out of the improving market sentiments. Many companies which are waiting to raise funds from the market started revisiting their plans. Madhya Bharat Agro Product Ltd (MBAP) is one of such company which was waiting since 27 May 2011.

MBAP has revised its DRHP for the second time and submitted it to SEBI again on the 29^th November 2012. The company plans to issue a 81 lakh fresh equity shares of face value of Rs 10 each. The issue will constitute 42.28% of the fully diluted post issue paid-up capital of the company. Its shares will list only on the Bombay Stock Exchange as per its DRHP. The company intends to use these proceeds to set up an integrated plant to manufacture Single Super Phosphate (SSP) with an annual capacity of 120000 tonnes. It will also go in for a Granulated Single Super Phosphate (GSSP) plant with a capacity of 90000 TPA and a Sulphuric Acid plant with a capacity of 49500 TPA. Some funds will also be uitlised to fund its working capital requirements once these plants are commissioned. The capex is expected to be completed by end of FY2014.

MBAP is engaged in manufacturing of SSP and Benificiated Rock Phosphate (BRP). The manufacturing facility for both these are located at Rajova and Sorai in Madhya Pradesh, respectively. The company also has a trading business of agricultural commodities and textile fabrics since 2007-08. However, this contributed to only 0.16% of its total turnover in FY2013. The company has signed a 5-year MoU with Shriram Fertilisers and Chemicals, a unit of DCM Shriram Consolidated for marketing of 60000 MT SSP in Madhya Pradesh, Chattisgarh and Uttar Pradesh. MBAP is a part of the Otswal group, which has a turnover of Rs 150 crore. The company was started in 1997 and was taken over by the Otswal group in 2004.

According to the DRHP, MBAP is operating its existing plant with a capacity utilisation of almost 80 per cent for the last three years. However, it is expanding its capacity. Interestingly, despite commissioning of the new BRP facility, MBAP is depending upon Rajasthan State Mines & Minerals and Krishana Phoschem to the extent of 63% of its requirements. This may increase considerable possibilities of under-utilisation of existing and newly added capacity after completion of the capex.  Further, inventories and short-term borrowings have seen a significant up trend exhibiting MBAP's incapability to market its products and generate sufficient working capital for the operations. We will wait to comment further till the company announces the price band at which it intends raising money. Till then watch this space for more information on companies intending to raise money from the markets.