Ashnoor Textile RI review - (May apply)

•    The company that originally incorporated for exports of hand-knotted carpets has now changed its business in manufacturing and marketing of terry towels for export markets. 
•    It posted declining trends in its top and bottom lines for FY23.
•    It has given financial performance only up to June 30, 2023 ending period, which is highly surprising. 
•    Well informed investors may park funds for the long term rewards. 

ABOUT COMPANY:
Ashnoor Textile Mills Ltd. (ATML) was originally incorporated as Gupta Carpets Udyog Limited under the Companies Act, 1956, on January 21, 1984. Subsequently the name of our Company was changed from "Gupta Carpets Udyog Limited" to "GCUL Limited" and a fresh certificate of incorporation consequent to the change of name was issued on July 11, 1995. Thereafter the name of the Company was subsequently changed from "GCUL Limited" to "Ashnoor Textile Mills Limited" and a fresh certificate of incorporation consequent to the change of name was issued on April 29, 1999. The Registered office of the Company was shifted on October 24, 1996 to Behrampur, Khandsa Village, Gurgaon, Haryana - 122001, India.

It started operations to carry on the manufacturing and export of high-quality hand-knotted carpets for its consumers. Further, in order to expand its business verticals, the Company started the manufacturing and export of terry towels in FY 1994 along with hand-knotted carpets. Over time, the hand knotted carpet industry faced severe recession, which ultimately led to unfavorable conditions for the business, and thus, the Company gradually discontinued its business of hand-knotted carpets and concentrated on manufacturing and exporting terry towels only. 

Today, the Company is engaged in supply of terry towels to medium to large size hotel chains. ATML is primarily engaged in manufacturing terry towels to cater to the hospitality industry. It also manufactures colored towels as per the demand in the targeted market and all activities of the Company revolve around this main business as a single unit. Further there are no geographical segments as all the operations of the Company are in India only. As of June 30, 2023, it has produced over 845 tons of terry towels. The Company constantly strives towards maintaining high sets of standards in all areas, whether be in combing the yarn or shipping towels overseas. More than 90% of the export sales are to USA. The products are sold to wholesalers in the USA, who further sell them to the Hotels which are basically the end users. As of the date of filing this offer document, it had 296 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 3186462 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 6.37 cr. The RI opens for subscription on May 07, 2024, and will close on May 16, 2024. The company is offering RI in the ratio of 1 for 4 to its eligible stakeholders as of the record date of April 26, 2024. The full amount it to be paid on application for the number of shares applied. Post allotment, RI shares will be listed on BSE. The company is spending Rs. 0.30 cr. for this RI process, and from the net proceeds, it will utilize Rs. 4.63 cr. for adjustment of unsecured loans from promoters, Rs. 1.44 cr. for general corporate purposes. 

The issue is self-managed by the company itself and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 12.75 cr. will stand enhanced to Rs. 15.93 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 31.87 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company posted a total income/net profit of Rs. 262.32 cr. / Rs. 8.96 cr. (FY22), and Rs. 177.79 cr. / Rs. 6.12 cr. (FY23). Thus it posted declining top and bottom line for FY23. For Q1 of FY24 ended on June 30, 2023, it earned a net profit of Rs. 2.40 cr. on a total income of Rs. 31.97 cr. Trade receivables of Rs. 28.14 cr. as of June 30, 2023, also raise concern. As of the said date, its current paid-up equity capital of Rs. 12.75 cr. is supported by free reserves of Rs. 43.88 cr. and share premium fund of Rs. 2.40 cr. 

Though RI is floated in the month of May 2024, it has disclosed its financial performance only till June 30, 2023, which not only surprising, but also raise concern for non-disclosure of financial performance at least till December 31, 2023.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 507872 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 82.34 on April 25, 2024, and opened on an ex-right basis at Rs. 66.42 on April 26, 2024. Since then, it has marked a high/low of Rs. 66.42 / Rs. 51.45. The scrip last closed at Rs. 52.01 as of May 06, 2024. For the last 52 weeks' it has posted a high/low of Rs. 69.91 / Rs. 25.05. 

The promoters' holding has been constant around 72.45% for the last three quarters ended with March 31, 2024. The counter is well managed above the RI value and considering its last traded price, it is at a discount of around 61.5%. 

Note: My family has small holding in this company and we are planning to subscribe for RI for the eligible entitlement.