Davangere Sugar August 25 RI review - (Not Rated)

•    The company is engaged in the manufacturing of sugar and other byproducts related to its process.
•    This is the 2nd RI from the company since May 2022.
•    The company marked decline in its top and bottom lines for FY25.
•    The RI is aggressively priced in context of its recent financial data.
•    Well-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
Davangere Sugar Co. Ltd. (DSCL) is into manufacture of Sugar, Molasses (Sugar Unit), Generation of the Power (Co-gen Unit), Production of Ethanol (Distillery Unit) and incidental by-products like Bagasse, Press Mud, DDGS (wet or dry) and Ash. The Company commenced commercial production of Sugar in the year 1974, with a capacity of 1250 TCD. 

The Government of Karnataka was managing the affairs of the Company till the year 1995 and Shamanur group acquired the shares of the Company from Government of Karnataka during the FY 1995-96. Later on, the Sugar Unit was expanded up to 4750 TCD, Co-gen Unit with installed with capacity of 24 MW for generation of power and was commissioned in March 2004 and Distillery Unit for production of Ethanol was commissioned in June 2022. Over the periods, for the last three fiscals, its capacity utilization has declined sharply except that of Ethanol. The offer document is silent on its employees’ strength.

ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 489239202 equity shares of Re. 1 each at a fixed price of Rs. 3.05 per share to mobilize Rs. 149.22 cr. The RI has opened for subscription on August 14, 2025, and will close on August 29, 2025. The company is offering RI in the ratio of 13 for 25 to its eligible stakeholders as of the record date of August 06, 2025. This is the 2nd RI from the company since May 2022.

The company is asking for full money on application for number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 2.25 cr. for this RI process, and from the net proceeds, it will utilize Rs. 67.50 cr. for repayment of its certain borrowings, Rs. 44.25 cr. for adjustment of unsecured loans from promoters, and Rs. 35.22 cr. for general corporate purposes.

The RI is solely lead managed by the company itself., while Integrated Registry Management Services Pvt. Ltd. is the registrar to the issue. 

Post RI, company’s current paid-up equity capital of Rs. 94.08 cr. will stand enhanced to Rs. 143.01 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 436.18 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, it has posted a total income/ net profit, of Rs. 216.53 cr.  / Rs. 12.24 cr. (FY24), Rs. 214.99 cr. / Rs. 10.83 cr. (FY25). It marked a minor setback in its top and bottom lines for FY25. Its NAV stood at Rs. 2.07 per share for FY25, against Rs. 1.97 per share for FY24. (Based on Re. 1 FV).

DIVIDEND POLICY:
The offer document is silent on its dividend policy. The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 543267 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 3.36 on August 05, 2025, 2025, and opened on an ex-right basis at Rs. 3.21 on August 06, 2025, 2025. Since then, it has marked a high/low of Rs. 3.38 / Rs. 3.11. The scrip last closed at Rs. 3.18 as of August 11, 2025. For the last 52 weeks’ it has posted a high/low of Rs. 7.54 / Rs. 2.72. 

The promoters’ holding has declined to 47.87% as of quarter ended June 30, 2025, against 54.26% as of quarter ended December 31, 2024. The counter is currently trading just above RI price to tempt investors.