Keells Foods Products PLC has summoned an extraordinary general meeting on February 19 to obtain shareholder approval to make a rights issue of seven new shares for every 10 shares presently held at Rs.50 per share to infuse Rs.175 million zero cost capital into the company to fund an expansion plan into India.

This expansion will be undertaken through John Keells Foods India Private Limited (JKFI), a 100% subsidiary of Keells Food Products.

In a circular to shareholders, KFP said that India, with a population of over one billion inclusive of the middle class in excess of 300 million, has over the last few years shown a growth in demand for convenience food facilitated to a large extent by the growth in modern retail trade in Indian cities.

"KFP has over several years been exporting its range of processed meats, in particular to several South Indian states where the brand is well established," the circular said.

"The large cities in the North and West India have been identified as a growing market in which KFP can launch its processed meat products abroad."

Shareholders have been told that this expansion project will carry the risks and rewards associated with the market for processed foods in India and provide a geographical diversification to KFP’s business activities and revenue streams.

In the nine months ended December 31, 2008 KFP posted revenue of Rs.1.4 billion, up 21% from Rs.1.2 billion a year earlier but saw its net profit decline 23% to Rs.44.8 million from Rs.58.5 million earned in the comparative period the previous year.

KFP paid shareholders a dividend of Rs.3.50 a share last year, up from Rs.2.50 paid in 2007.

The company has a stated capital of Rs.99.8 million, capital reserves of Rs.92.8 million and revenue reserves of Rs.150.4 million. Bank overdrafts of Rs.90.6 million were carried in KFP’s books during the period under review.

As JKH owns 73.3% of KFP and will be taking its full entitlement and applying for additional shares, analysts expect the rights issue to be fully subscribed despite currently dull stock market conditions.