Globe Textiles RI (NSE) review - (May apply)

•    GTIL is in the business of manufacturing and marketing garments, cotton printed fabrics etc.
•    Its financial performance has expressed pressure on margins with rising competition.
•    The company is operating in a highly competitive and fragmented segment. 
•    Investors may switch over the deal while selling their current holding and applying for RI to book some profits.

PREFACE:
Off late we are witnessing self-managed rights issues, wherein, we find many anomalies in the offer documents, and this is the company, where the offer document missing many info as well as having a mismatch on the RI issue expenses data. It is also missing its employees' strength data. It also has garble on its number of production units (refer P71 of the offer document). 

ABOUT COMPANY:
Globe Textiles (India) Ltd. (GTIL) is engaged in manufacturing of Garments, cotton printed fabrics, home textiles and fancy fabrics. The Company's manufacturing activities are undertaken at six different units situated at Ahmedabad - Gujarat. 

The Company caters both domestic as well as international markets. It has also been recognized by Government of India as a "One Star Export House". The company majorly focuses in high quality of fabrics and garments across globe utilizing best technology, delivering quality textiles at the most competitive prices and maintaining long term association with clients.

Its long-standing relationship with major customers has been one of the most significant factors contributing to its growth. Over the years, it has steadily developed a robust base of international customers for its products in south-east Asian and gulf countries. The offer document is silent on its employees' strength. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 151141500 equity shares of Rs. 2 each at a fixed price of Rs. 3 per share to mobilize Rs. 49.00 cr. The issue has already opened for subscription on March 06, 2024, and will close on March 15, 2024. The full amount is to be paid along with application for the number of shares applied. The company is offering RI in the ratio of 1 for 1 to eligible stakeholders as of the record date of February 23, 2024. Post allotment, shares will be listed on NSE. The company is spending Rs. 0.15 cr. for this RI process, and from the net proceeds of the RI, the company will utilize Rs. 20.00 cr. for acquisition of equity shares in Globe Denwash Pvt. Ltd., Rs. 14.50 cr. for repayment of loan, Rs. 10.50 cr. for working capital, and Rs. 4.00 cr. for general corporate purposes. 

There is a mismatch in the IPO funds utilization information. While the company claims approximant total expenses of Rs. 3.85 cr., this amount is not reflected in the tables on the offer document pages no. 19, 52, and 57.

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

Post-RI, company's current paid-up equity capital of Rs. 30.23 cr. will stand enhanced to Rs. 60.46 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 90.69 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit of Rs. 385.56 / Rs. 5.14 (FY22), and Rs. 401.83 cr. / Rs. 4.51 cr. (FY23). As per the unaudited results data submitted to NSE, the company earned a net profit of Rs. 2.81 cr. on a total income of Rs. 215.10 cr. for H1 of FY24 ended on September 30, 2023. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. The company has voluntarily adopted a dividend policy based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON NSE WEBSITE DATA: SCRIP CODE: GLOBE (FV Rs. 2).
The scrip last closed on cum-right basis at Rs. 4.50 on February 22, 2024, and opened on an ex-right basis at Rs. 3.75 on February 23, 2024. Since then, it has marked a high/low of Rs. 4.35 / Rs. 3.75. The scrip last closed at Rs. 4.30 as of March 06, 2024. For the last 52 weeks' it has posted a high/low of Rs. 4.92 / Rs. 1.72. The counter is currently under ESM - II (35).

The promoters' holding has been constant at 40.91% for the last three quarters ended with December 31, 2023. The counter is well managed above the RI price to lure investors.