Asian Granito RI review - (May apply)

•    AGIL has been in the business of manufacturing a variety of tiles/bath wares etc. 
•    It has posted static top line for the last four fiscals.
•    In pre-RI FY21 super margins/profits raises concern as it operates in a competitive field.
•    Though RI is attractively priced, its lingering place in peers is the main hindrance.
•    Declining promoter's holding raises concern. 

ABOUT COMPANY:
Asian Granito India Ltd. (AGIL) is leading its path towards manufacturing various types of tiles, offering a wide spectrum of manufacturing, sub-contract manufacturing, marketing and distribution-related activities under a single roof. The Company is engaged in the business of manufacturing tiles, vitrified and ceramic, and cater to an extensive gamut of consumers through a vast range of products at various price points including polished, double charged, glazed, unglazed, rustic, matt, homogenous and nonhomogeneous body, etc., which are manufactured through ultra-modern high-end technology along with tailor-made designs customized according to the client requirements. 

With the commencement of commercial production in 2003, the Company also manufactures engineered marble and quartz stone with varied thickness, design, shape and colour range to cater to the middle to upper-middle segment using fine quality ingredients and the latest expertise and technology.

Recently in 2019, the Company has also stepped into the business of the bath-ware range to increase its product portfolio and strengthen the domestic and international markets reach. The company manufactures some of the products on a contractual basis and imports some of the products. Bath-ware, the range includes faucets and sanitary ware such as washbasins, urinals, one-piece and wall-hung water closets and many more with the latest features and technology like anti-bacterial, twin flushing technology, scratch, chemical and stain resistance, etc. Over the years, it has made continuous investments in manufacturing infrastructure to support product portfolio requirements and reach. 

The Company along with its subsidiaries owns 5 state-of-the-art manufacturing units spread across Gujarat. Its strategic location enables it to procure key raw materials from the quarries in Rajasthan at cheaper costs. All the units have a combined installed production capacity of 2,32,98,000 square meters p.a. (for FY 2020-21). The Company has also installed a wind power generator to augment the power requirements of the aforesaid manufacturing facilities thereby reducing the usage of fossil fuel.

ISSUE DETAILS:
To part finance its plans for repayment/prepayment of certain loans (Rs. 80.00 cr.), working capital needs (Rs. 83.75 cr.) and general corpus funding (Rs. 49.39 cr.), AGIL is coming out with a rights issue (RI) of 22464188 equity shares of Rs. 10 each at a fixed price of Rs. 100 per share to mobilize Rs. 224.64 cr. The company is offering rights shares in the ratio of 19 shares for every 29 shares held as of the record date i.e. September 09, 2021. The issue opens for subscription on September 23, 2021, and will close on October 07, 2021. Post allotment, shares will be listed on BSE and NSE. The company will be spending Rs. 11.50 cr. for this rights issue process. 

The issue is jointly lead managed by Holani Consultants Pvt. Ltd. and BOI Merchant Bankers Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post issue AGIL's current paid-up equity capital of Rs. 34.29 cr. will stand enhanced to Rs. 56.75 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 567.52 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, on a consolidated basis, AGIL has posted turnover and net profit of Rs. 1232.27 cr. / Rs. 46.05 cr. (FY20) and Rs. 1295.82 cr. with a net profit of Rs. 57.61 cr. for FY21. For the Q1 of FY22 ended on June 30, 2021, it has earned a net profit of Rs. 8.05 cr. on a turnover of Rs. 273.23 cr. Based on this performance, if we annualize FY22 results and attribute it to fully diluted post-RI equity, then the asking price is at a P/E of 17.63. Its top line has been static for the last four fiscals and has posted inconsistency in bottom lines with super-profits in a pre-RI year. 

SCRIP PERFORMANCE ON BSE:
The scrip turned ex-rights at Rs. 146.00 on September 08, 2021. It closed at Rs. 164.25 on cum-right basis on September 07, 2021. Since then it has marked high/low of Rs. 166.35 / Rs. 143.40. The scrip has posted the last 52 weeks high/low of Rs. 268.71/Rs. 115.98 (on ex-rights basis). On Friday, September 17, 2021, it closed at Rs. 152.95. Based on this price, the market cap of AGIL stands at Rs. 868.02 cr. Promoter's holding has been declining. It has come down to 26.12% as of Jun 30, 2021, against 37.98% as of March 31, 2021, and 34.02% as of December 31, 2020. This remains a major concern.