Amal Ltd. RI review (May apply)

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•    Amal - earlier a Piramal group company is now under Atul Ltd. fold.
•    It has posted erratic financial performance for the reported periods.
•    RI is priced at a negative P/E due to losses for 3Qs of FY23.
•    The RI is priced at a discount of around 25.14% based on the last traded price.
•    Well-informed Investors may consider it with a long-term perspective.

Amal Ltd. (AMAL) was a Piramal group company. It sold its controlling interest to Atul Ltd. in FY86 and established a subsidiary Amal Speciality Chemicals Ltd. in October 2020. 

It currently manufactures bulk chemicals such as Sulphuric acid and oleum along with its downstream products such as Sulphur dioxide and Sulphur trioxide. These products are commonly known as Sulphuric acid equivalent products. Steam is generated in large quantities during the manufacturing processes of these chemicals which are further used for captive consumption and the surplus is sold to third parties. 

These chemicals are used in several industries like dyes, fertilizers, personal care, petrochemical, pharmaceutical, textile, etc. These chemicals are generally sold to customers who are in close proximity to its manufacturing facility. Amal's business operations and products cater to the business-to-business segment. It is registered as a small enterprise under the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).

The company is coming out with a rights issue (RI) of 2937662 equity shares of Rs. 10 each at a fixed price of Rs. 170 per share to mobilize Rs. 49.94 cr. It is offering RI in the ratio of 24 for 77 to the eligible stakeholders as of the record date of February 21, 2023. The issue opens for subscription on March 06, 2023, and will close on March 14, 2023. The full amount is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.64 cr. for this RI process and from the net proceeds it will spend Rs. 37.00 cr. for investment in a wholly owned subsidiary i.e. Amal Speciality Chemicals Ltd., and Rs. 12.30 cr. for general corporate purposes. (the offer document erred on general corporate purpose expenses as Rs. 12.93 cr. - refer to page 44). 

Keynote Financial Services Ltd. is the sole lead manager of this issue and Link Intime India Pvt. Ltd. is the registrar of the issue. 

Post-RI, AMAL's current paid-up equity capital of Rs. 9.43 cr. will stand enhanced to Rs. 12.36 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 210.17 cr.

On the financial performance front, the company has posted a turnover/net profit of Rs. 31.67 cr. / Rs. 8.80 cr. (FY21) and Rs. 43.79 cr. / Rs. 1.11 cr. (FY22). For 3Qs of FY23, it posted a loss of Rs. - (12.16) cr. on a turnover of Rs. 44.00 cr. Thus it has posted erratic performances for the reported periods. 

The offer documents are silent on the company's dividend policy.  It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 278.00 on February 20, 2023, and opened on an ex-right basis at Rs. 247 on February 21, 2023. Since then, it has marked a high/low of Rs. 247.00 / Rs. 216.00. The scrip last closed at Rs. 227.10 as of March 03, 2023. For the last 52 weeks, it has posted a high/low of Rs. 392.26 / Rs. 205.66. The promoters' holding has been constant at 66.86% for the last three quarters ended on December 31, 2022. The counter is well managed above the par value to lure investors. 

Conclusion / Investment Strategy

As the company is currently under Atul Ltd. (Lalbhai group) fold and is in a revamp mode, its rights issue which is at a discount of around 25.14% based on its last traded price of Rs. 227.10 appears tempting. The best strategy can be to sell the RI entitlement quantity from the existing holding and apply for it. The speciality chemical segment is witnessing mixed investor interest. Cash surplus investors may consider parking funds for a long-term reward.

Review By Dilip Davda on Mar 3, 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 Amal Limited RI Views / Analysis / Recommendations ...

The Amal 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 Amal Rights Issue 2023 worth investing. The Amal Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if Amal Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Amal Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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