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Bannari Amman Spg RI review (May apply)

Bannari Amman Spinning Mills Limited Logo

•    BASML is a flagship company of the Bannari Amman group.
•    It has emerged as a fully vertically integrated textile company. 
•    For FY21 it suffered a setback on account of the pandemic, but is now back on track. 
•    Right issue is reasonably priced based on its financial parameters. 

ABOUT COMPANY:
Bannari Amman Spinning Mills Ltd. (BASML) is one of the flagship companies of Bannari Amman Group located in South India which offers a wide spectrum of manufacturing, trading, distribution and service-related activities in sectors like textiles, food processing, automobile distribution, etc. It has emerged as a fully vertically integrated textile company engaged in the business of manufacturing, spinning, weaving and processing cotton yarn. It is also engaged in the business of manufacturing woven and knitted fabrics, garments and wind power generation. 

BASML's principal line of business is manufacturing and marketing of cotton yarn, woven and knitted fabrics, home textile products, knitted garments along with the processing of fabrics and retailing of knitted garments. The Company manufactures cotton yarn and fabrics which are in turn used as a raw material in the manufacturing of knitted and woven garments. Moreover, all its manufacturing units and facilities are situated in the state of Tamil Nadu, India. Apart from manufacturing products for direct sale to customers, to ensure the full utilization of the installed capacity of manufacturing units, it also engaged in carrying out various textile processes for third parties on a job work basis. 

BASML procures cotton bales from domestic and international markets and market and sell cotton yarn, finished woven and knitted fabrics, knitted garments and home textiles to various garment manufactures. The company exports its products to countries including China, England, Israel, Cameroon, Tanzania, United States of America, Germany, Spain, Japan, Italy, Korea, Thailand, Myanmar, Portugal, Egypt, Canada, Indonesia, Australia, Bangladesh, Hong Kong, Vietnam, Kenya, Sri Lanka, Poland, etc. The Company is an integrated textile company and offers a diverse set of products that cater to various segments of the textile industry such as spinning, weaving, knitting, processing, home textiles and garments. The Company has also installed wind power generators 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 intercorporate deposits (Rs. 39.00 cr.), repayment/prepayment of certain borrowings (Rs. 59.00 cr.), BASML is coming out with a rights issue of 33333333 equity shares of Rs. 5 each in the ratio of 21 shares for every 20 shares held as of the record date of September 09, 2021. It has fixed a price of Rs. 30 per share for this issue. The company hopes to mobilize Rs. 100 cr. with this rights issue. It opens for subscription on September 20, 2021, and will close on October 04, 2021. Post allotment, shares will be listed on BSE and NSE. The issue is solely lead managed by Saffron Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. The company is spending Rs. 2 cr. for this rights issue process. 

Post issue, BASML's current paid-up equity capital of Rs. 15.75 cr. will stand enhanced to Rs. 32.42 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, BASML has posted a loss of Rs. 10.55 cr. on a turnover of Rs. 859.64 cr. for FY21. For the first quarter ended on June 30, 2021, it has reported a turnover of Rs. 206.81 cr. with a net profit of Rs. 12.21 cr. 

SCRIP PERFORMANCE ON BSE:
BASML scrip turned ex-right on September 08, 2021, at Rs. 64.90 and the last cum-right closing was at Rs. 97.00 per share on September 07, 2021. Since then it has marked the high and low of Rs. 69.50 and Rs. 59.45 till September 17, 2021. The scrip has marked the last 52 weeks high/low of Rs. 72.89 / Rs. 25.17 (on an ex-rights basis) and the last traded price is Rs. 60.95 per share. Based on this quote, the company's market cap comes to Rs. 395.21 cr. whereas based on the rights issue price, its market cap mulled at Rs. 194.53 cr. The current promoter's holding is 55.55% in the total paid-up capital and this ratio will remain the same or may increase in case of undersubscription to the rights issue. (All quotes here are as per the BSE website).


Conclusion / Investment Strategy

The textile sector is gaining grounds post new relief packages announced recently. The company has a proven track record. The rights issue appears reasonably priced. Investors may consider investing in this lucrative offer for medium to long term rewards.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Sep 17, 2021

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

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


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