Clara Ind RI BSE SME review - (May apply)

•    CIL is in the flexible plastic packaging solutions.
•    The segment is highly competitive and fragmented.
•    It has posted growth in its top and bottom lines in the last two fiscals. 
•    Well-informed/cash surplus - risk seekers may consider investment for the long term. 

PREFACE:
Clara Industries Ltd. came with its maiden IPO of Rs. 3.02 cr. with a fixed price of Rs. 43 per share in December 2021 and had a mandate with Gretex Corporate at that time. It is now coming with a rights issue (RI) at a price of Rs. 167 per share to mobilize Rs. 27.62 cr. and the issue is self-managed. The RI document is silent on its dividend policy.  

ABOUT COMPANY:
Clara Industries Ltd. (CIL) is engaged in the business of providing flexible plastic packaging solutions to clients. It serves varied sectors spanning FMCG, Consumer Products, Hardware Tools, Hospitality, Housekeeping, Pharmaceuticals, Clothing & Hosiery, Edible Oil, Salt and Sugar. The Company is known in the industry for manufacturing and supplying high-end multilayer Plastic bags and multilayer Plastic rolls in India. 

In flexible packaging, it manufactures printed films with surface printing as well as reverse printing, films between 51 microns and above as mandated by government laws and also laminates in two-, three- and four-layer structures. The company also manufactures standing pouches, side gazette pouches, Press & lock pouches and other pouches as per customer requirements. It has installed various testing equipment by virtue of which it will develop new packaging solutions at cheaper cost without affecting the quality of the products. 

Its machines are capable of manufacturing multiple products at one point in time. Its business is not seasonal in nature but demand for some items such as Plastic bangles and peanuts packaging is seasonal. It manufactures plastic bangles which sell mostly during a festive time like Diwali and Karva Chauth whereas demand for peanuts tends to increase during the period from September to January. As of the date of filing this offer document, it had 18 employees on its payroll.

ISSUE DETAILS:
The company is coming out with a RI issue of 1653986 shares at a fixed price of Rs. 167.00 per share to mobilize Rs. 27.62 cr. The company is issuing RI in the ratio of 2 for 3 to eligible stakeholders as of the record date of May 11, 2023. The issue opens for subscription on May 23, 2023, and will close on June 01, 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 SME. The market lot for this RI is 800 shares. The company is spending Rs. 0.10 cr. for this RI process and from the net proceeds, it will utilize Rs. 21.02 cr. for working capital, Rs. 6.50 cr. for general corporate purposes. 

The issue is self-managed by the company and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Post-RI, CIL's current paid-up equity capital of Rs. 2.48 cr. (2480980 shares) will stand enhanced to Rs. 4.14 cr. (4134966 shares). Based on the RI pricing the company is looking for a market cap of Rs. 69.10 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, CIL has posted a turnover/net profit of Rs. 3.87 cr. / Rs. 1.05 cr. (FY22) and Rs. 11.40 cr. / Rs. 3.95 cr. (FY23). 

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: 543435 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 222.75 on May 10, 2023, and opened on an ex-right basis at Rs. 210.00 on May 11, 2023. Since then, it has marked a high/low of Rs. 253.00 / Rs. 189.90. The scrip last closed at Rs. 201.00 as of May 19, 2023. For the last 52 weeks, it has posted a high/low of Rs. 253.00 / Rs. 73.53. The promoters' holding has declined from 71.71% as of June 30, 2022, to 66.63% as of March 31, 2023. The counter is well managed above the RI value to lure investors.