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Aarti Surfactants RI review (May apply)

Aarti Surfactants Limited Logo

•    ASL is an Aarti group company in the business of manufacturing surfactants for the personal and home care industries. 
•    It has marked inconsistency in its bottom lines despite growth in its top lines. 
•    Based on its current traded price, the issue appears fully priced. 
•    Its RI is an investor-friendly gesture of offering partly paid shares.
•    Investors may consider parking funds with long-term perspectives. 

ABOUT COMPANY:
Aarti Surfactants Ltd. (ASL) is a manufacturer of ionic and non-ionic surfactants and primarily caters to the personal care and home care industries. Its products find application in a host of consumer-centric personal care and home care products, including, inter alia, skin care, oral care, hair care, cosmetics, toiletries, and detergent products and for industrial applications. 

It offers a wide range of innovative, customization, eco-friendly and high‐quality products to its customers. (Ionic surfactants are the surface-active agents containing cations or anions as in their formulations, whereas non‐ionic surfactants are those that can be used with high salinity or hard water, and are compatible with other types, and are excellent candidates for complex mixtures with low toxicity levels). 

The company has significantly expanded and diversified its product profile, client base and geographical footprint. Currently, its product portfolio comprises over 20 product grades, which are marketed to customers in over 13 countries, including India, North America, South America, South‐East Asia and Europe. ASL's wide product portfolio comprises surfactants, mild surfactants, preservatives, pearlising agent and blends, which finds application in diverse end-use products. It also manufactures formulated blends as per customer specifications and ensures timely delivery by leveraging the distribution network. As of November 30, 2022, it had 321 employees on its payroll.

ISSUE DETAILS:
The company is coming out with a rights issue (RI) of 892291 equity shares of Rs. 10 each at a fixed price of Rs. 555 per share and is following a partly paid RI process. The company is asking for part payment of Rs. 222 per share on application and the rest of Rs. 333 by calls from time to time. The issue opens for subscription on January 25, 2023, and will close on February 03, 2023. Post allotment, shares will be listed on BSE and NSE. It is offering 2 shares for every 17 shares held to eligible stakeholders as of the record date of January 17, 2023. With this RI, the company mulls mobilizing Rs. 49.52 cr. and will spend Rs. 0.50 cr. for this issue. From the net proceeds, it will utilize Rs. 37.20 cr. for working capital and Rs. 11.82 cr. for general corporate purposes.

Post RI, ASL's current paid-up equity capital of Rs. 7.58 cr. will stand enhanced to Rs. 8.48 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 470.46 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, ASL has (on a consolidated basis) posted a turnover/net profit of Rs. 326.07 cr. / Rs. 2.09 cr. (FY20), Rs. 465.83 cr. / Rs. 21.63 cr. (FY21), and 575.81 cr. / Rs. 5.50 cr. (FY22), For H1 of FY23, it earned a net profit of Rs. 4.03 cr. on a turnover of Rs. 310.08 cr. While it posted growth in its top lines, it marked inconsistency in its bottom lines for these years. 

As of September 30, 2022, it's current paid-up equity capital of Rs. 7.58 cr. is supported by free reserves of Rs. 132.30 cr.

DIVIDEND POLICY:
The company paid a dividend of 30% for FY21 and had skipped it before and after that. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 543210 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 647.50 on January 16, 2023, and opened on an ex-right basis at Rs. 637.50 on January 17, 2023. Since then, it has marked a high/low of Rs. 637.50 / Rs. 568.50. It last closed at Rs. 596.80 as of January 23, 2023. The scrip has marked the last 52 weeks' high/low of Rs. 1027.36 / Rs. 568.50. The promoter's holding has been constant at 45.04 for the last three quarters.


Conclusion / Investment Strategy

The company belongs to the Aarti group and is in the lucrative business of surfactants. Though it posted growth in its top lines for the last three fiscals, its bottom line marked inconsistency. Based on its current quotes, the issue appears fully priced. However, considering its investor’s friendly gesture of partly paid RI, investors may consider investing with a long-term perspective.

Review By Dilip Davda on Jan 23, 2023

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

More Aarti Surfactants Limited RI Views / Analysis / Recommendations ...

The Aarti Surfactants Rights Issue 2023 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Aarti Surfactants Rights Issue 2023 worth investing. The Aarti Surfactants Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if Aarti Surfactants Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Aarti Surfactants Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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