Balkrishna Paper RI review (Avoid)

• The company is engaged in manufacturing and marketing of paper and paper boards.
• Its loses have mounted for the reported periods and has a negative P/E.
• The financial performance does not match the asking price.
• There is no harm in skipping this pricey bet.

ABOUT COMPANY:
Balkrishna Paper Mills Ltd. (BPML) is engaged in manufacturing of Paper and Paper Board for over five decades. Over the years it has been recognised for quality of products and delivery timelines which ensures steady demand for its produce and enables the company to plan the production accordingly.

BPML has been in the business of manufacturing of Paper and Paper boards based on recycled pulp ("Paper and Paper Board Business"). Its manufacturing facility for Paper and Paper Board Business is situated at Ambivali near Kalyan (Maharashtra). The installed capacity at plant is 60,000 TPA. To supplement its power requirement for manufacturing, it also has a captive thermal power plant of capacity 4.5MW in same location in Ambivali.

Owing to the consistency and high quality of products, the company enjoys a strong brand recall in the Paper and Paper boards industry. It gets repeat orders from most of its customers. Further, such brand recognition also helps it to command a slight premium to market price and pass on changes in raw material costs to customers.

The company shall focus on increasing its sales from export of recycled waste paper pulp based Paper and Paper boards which are in high demand in international markets. Higher exports will also help in hedging its requirements of foreign currency for import of waste-paper/ pulp. The company currently exploring opportunities in countries like Bangladesh, Gulf countries, South African Countries for value added products as well as paper board products. However, the offer document is silent on its employees' strength and dividend policy.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 21479688 equity shares of Rs.10 each at a fixed price of Rs. 21 per share to mobilize Rs. 45.11 cr. The RI opens for subscription on April 02, 2024, and will close on April 15, 2024. The company is offering RI in the ratio of 2 for 1 to its eligible stakeholders as of the record date of March 15, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 0.40 cr. for this RI process, and from the net proceeds, it will utilize Rs. 10.50 cr. for repayment/prepayment of certain borrowings, Rs. 25.00 cr. for redemption of redeemable preference shares, and Rs. 9.21 cr. for general corporate purposes.

The RI is self-managed by the company and Navigant Corporate Advisors Ltd. is the advisor to the issue and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue.

Post-RI, company's current paid-up equity capital of Rs. 10.74 cr. will stand enhanced to Rs. 32.22 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 67.66 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit/- (loss) of Rs. 244.59 cr. / Rs. - (4.69) cr. (FY22), and Rs. 109.45 cr. / Rs. - (51.88) cr. (FY23). For the 9M of FY24 ended on December 31, 2023, it posted a loss of Rs. - (42.24) cr. on a total income of Rs.4.34 cr. Thus the company has been incurring losses for the reported periods. Based on its recent financial performance, the issue is exorbitantly priced.

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: 539251 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 39.50 on March 14, 2024, and opened on an ex-right basis at Rs. 25.85 on March 15, 2024. Since then, it has marked a high/low of Rs. 29.95 / Rs. 23.77. The scrip last closed at Rs. 23.77 as of March 28, 2024. For the last 52 weeks' it has posted a high/low of Rs. 38.53 / Rs. 15.86.

The promoters' holding has been constant at 58.70% for the last three quarters ended with December 31, 2023. The counter is well managed above the RI price to lure investors. The issue is priced at a negative P/E. The counter is currently under ESM Stage 2.

Conclusion / Investment Strategy

Though this RI is at a moderate discount to its current market price, considering its financial performances for the reported periods, the issue is exorbitantly priced. Over three times paid-up equity post RI also indicates its servicing issue as company has been incurring losses currently. There is no harm in skipping this pricey bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on March 28, 2024

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 the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their 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.

About Dilip Davda

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

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Balkrishna Paper Mills Ltd Review by Dilip Davda

The Balkrishna Paper Mills Rights Issue 2024 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 Balkrishna Paper Mills Rights Issue 2024 worth investing. The Balkrishna Paper Mills Rights Issue 2024 Note sets the Rights Issue expectations in systematic way which tells you if Balkrishna Paper Mills Rights Issue 2024 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Balkrishna Paper Mills Rights Issue 2024 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.

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Balkrishna Paper RI review (Avoid)

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