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Dynemic Products RI review (May apply)

Dynemic Products Limited Logo

•    DPL is engaged in the manufacturing and marketing of Food colours and dye intermediates.
•    It has posted growth in top and bottom lines for FY20 and FY21.
•    For FY22 so far, though its top-line indicates growth, its bottom line lagging behind. 
•    Low promoter's holding raises concern. 
•    Well informed investors may park funds with a long term perspective.

ABOUT COMPANY:
Dynemic Products Ltd. (DPL) is engaged in the business of manufacturing and sale of different grades of food colours, lake colours, blended or preparation colours, salt-free colours, D&C colours, etc. (collectively known as 'Food Colours') and dye intermediates. Its Food Colours are used for various applications including food & beverages, confectionery, pharmaceuticals, feeds, cosmetics, homecare, personal care, inkjet inks etc. 

DPL's Food Colours are used as additives to either enhance the original colours associated with the products which otherwise fade or disappear due to light, air, temperature and moisture or to provide a colourful identity to products. With increasing consumer awareness towards safety and quality in the products they use, Food Colours are also used in products like toys, stationery, toiletry products, food ink, tattoo ink, etc. instead of industrial dyes. DPL's Food Colours are sold in powder and granular forms to customers. Its dye intermediates are used to produce dyes such as reactive dyes, acid dyes, disperse dyes, ramazole dyes, etc. as well as pigments, which have various applications in textile, leather, paper, plastic industries, etc.

It is operating from three manufacturing units located in the state of Gujarat. The company is exporting its products to more than 50 countries globally. Its export revenues have marked steady growth for the reported financial data of the offer documents. As of March 31, 2022, it had 340 permanent employees and 366 contractual workers. The company undertake selective and need-based recruitment to maintain the size of the workforce.

ISSUE DETAILS:
To part finance its plans for working capital requirements (Rs. 24.75 cr.), DPL is offering rights shares in the ratio of 1 for every 20 shares held as of the record date of May 13, 2022, to eligible shareholders. It has fixed a price of Rs.450 per equity share of Rs. 10 each. It will be issuing 566422 shares to mobilize Rs. 25.49 cr. The RI opens for subscription on May 25, 2022, and will close on June 08, 2022. Post allotment, shares will be listed on BSE and NSE. Investors will have to pay Rs. 225 per share on application and the balance on one or more calls by the company post allotment. DPL is spending Rs. 0.74 cr. for this RI process. 

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

DPL's current paid-up equity capital of Rs. 11.33 cr. will stand enhanced to Rs. 11.90 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 535.27 cr. 

FINANCIAL PERFORMANCE: 
On the financial performance front, DPL has (on a consolidated basis) posted turnover/net profits of Rs. 182.27 cr. / Rs. 24.17 cr. (FY20) and Rs. 205.59 cr. / Rs. 28.49 cr. (FY21). For the first nine months of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 19.02 cr. on a turnover of Rs. 180.15 cr. 

DIVIDEND POLICY:
The offer documents missing information on the Dividend Policy of the company. However, based on BSE website info, it paid dividends at the rate of 15% from FY2014 to FY2020. It will adopt a prudent dividend policy post listing of Rights shares, based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 532707:
The scrip last closed on cum-right basis at Rs. 498.60 on May 11, 2022, and opened on the ex-rights basis at Rs. 492.00 on May 12, 2022. Since then it has marked high/low of Rs. 535.45 / Rs. 465.30. The scrip last closed at Rs. 516.85 as of May 20, 2022. Based on this quote, its post-RI market cap stands at Rs. 588.45 cr. The scrip has posted the last 52 weeks high/low of Rs. 766.40 / Rs. 437.80. Promoters holding is at 29.75% for the last three quarters. The counter is well operated by vested interests around RI timings.


Conclusion / Investment Strategy

The company has posted growth in its top and bottom lines for FY20 and FY21. However, for FY22 so far, it is lagging behind on net profits aspects as indicated by the results till 31.12.2021. Low promoter’s holding indicates operation on counters by vested interest parties. Well informed investors may park funds with a long term perspective.

Review By Dilip Davda on May 22, 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 Dynemic Products Limited RI Views / Analysis / Recommendations ...

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