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Coastal Corp RI review (May apply)

Coastal Corporation Limited Logo

•    CCL is engaged in the processing of shrimp and shrimp products.
•    It has suffered a setback in its bottom line for FY22.
•    It is asking for 25% money on the application. 
•    The counter is well managed above the RI price to lure investors.
•    Cash surplus/risk seeker investors may consider parking of funds.

ABOUT COMPANY:
Coastal Corporation Ltd. (CCL) is engaged in the processing of a variety of shrimp & Shrimp products. It offers shrimps in different forms such as raw in frozen blocks and cooked in IQF form as per the Customer's specifications. CCL's variety of Shrimps includes (i) sea caught shrimps i.e., Sea White (Penaeus Indicus), Sea Tiger (Penaeus Monodon), Pink Brown Shrimp (Metapenaeus Monoceros), (ii) aquaculture shrimps i.e., Black Tiger (Penaeus Monodon) and Vannamei (Litopenaeus vannamei).

The company sells its products under the brand name "Coastal", "Coastal Premium", "Coastal Gold", "Jewel" and "President". It has launched these brands as part of its marketing strategy to target different segments in different regions. Also, the company is engaged in customized packaging of Shrimps as per the requirement of customers. CCL's products are exported to foreign markets which mainly include the U.S.A., and also to other countries like Europe, Canada, U.A.E., Saudi Arabia, Australia, Hong Kong, Korea, and China.

CCL currently has two processing units in Vishakhapatnam and the third one is coming up at Kakinada. 

ISSUE DETAILS:
To part finance its needs for investment in its wholly owned subsidiaries (CBPL Rs. 16.00 cr. and CFIL Rs. 18.00 cr.) and general corporate purposes (Rs. 8.92 cr.), CCL is offering a rights issue (RI) of 1929800 equity shares of Rs. 10 each at a fixed price of Rs. 225 per share to mobilize Rs. 43.42 cr. The company is offering the right shares in the ratio of 1 share for every 6 shares held as of the record date of August 26, 2022. The issue opens for subscription on September 12, 2022, and will close on September 27, 2022. Only 25% i.e. Rs. 56.25 per share is to be paid along with the application and the rest on one or subsequent calls by the company from time to time. Post allotment, shares will be listed on BSE and NSE. CCL is spending Rs. 0.50 cr. for this RI process. 

The issue is solely lead managed by Finshore Management Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue.

Post RI, CCL's current paid-up equity capital of Rs. 11.58 cr. will stand enhanced to Rs. 13.51 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 303.94 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, CCL has (on a consolidated basis) posted turnover/net profits of Rs. 481.94 cr. / Rs. 18.41 cr. (FY21) and Rs. 504.38 cr. / Rs. 13.55 cr. (FY22). Thus even though its top line marked a significant rise, its bottom line marked a decline.

As per the unaudited results filed with the exchanges, for Q1 of FY23, it has earned a net profit of Rs. 8.79 cr. on a turnover of Rs. 122 cr. 

DIVIDEND POLICY:
The company is a dividend-paying company. It paid a dividend of Rs.1.50 per share in March 2020, Rs. 3.0 per share in September 21 and Rs. 2.00 per share in May 2022. It will adopt a prudent dividend policy post listing of RI, based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 501831:
The scrip last closed on cum-right basis at Rs. 352.75 on August 24, 2022, and opened on an ex-right basis at Rs. 354.75 on August 25, 2022. Since then it has marked a high/low of Rs. 374.80 / Rs. 335. The scrip last closed at Rs. 350.40 as of September 09, 2022. Based on this quote, its post-RI market cap stands at Rs. 473.34 cr. 

The scrip has posted the last 52 weeks high/low of Rs. 526.76 / Rs. 226.05. Promoter holding has remained static at 41.09% for the last three quarters ended on 30.06.2022.

The counter is well managed above the RI price to lure investors.


Conclusion / Investment Strategy

The company is witnessing pressure on margins as indicated by its last two years’ financial data. It appears that the counter is well managed above RI price to lure investors. Cash surplus/risk seeker may consider parking of funds.

Review By Dilip Davda on Sep 9, 2022

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

More Coastal Corporation Limited RI Views / Analysis / Recommendations ...

The Coastal Corporation Rights Issue 2022 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 Coastal Corporation Rights Issue 2022 worth investing. The Coastal Corporation Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Coastal Corporation Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Coastal Corporation Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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