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Hatsun Agro RI review (Apply)

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•    HAPL is a south-based dairy company with having PAN India presence.
•    It has marked consistent growth in its top lines for the reported periods. 
•    It marked a setback in its bottom lines for the last 18 months on account of higher provisioning.
•    RI is at a discount of around 53% based on its last traded price. 
•    Investors may consider parking funds for short to long-term rewards. 

ABOUT COMPANY:
Hatsun Agro Product Ltd. (HAPL) is a dairy company based in south India. Its business model in India consists of procurement, processing, distribution, and marketing operations of dairy products. The company procures milk from farmers through our Hatsun Milk Banks ("HMBs") and Active Bulk Coolers ("ABCs") and manufactures various dairy-based products such as milk, curd, ghee, butter, paneer, ice-cream, chocolates, yoghurt, skimmed milk powder, lassi, buttermilk, cheese spread, and dairy whitener. Its processing and manufacturing facilities are primarily across the states of Tamil Nadu, Andhra Pradesh, Karnataka, Telangana, and Maharashtra. 

It also manufactures cattle feed. HAPL's marketing/ sales operations are spread across the states of Tamil Nadu, Karnataka, Kerala, Andhra Pradesh, Telangana, Maharashtra, Odisha, Goa, and the union territory of Pondicherry. It primarily markets milk and curd under its own brand names "Arokya" and "Hatsun" and ice creams under the brand name "Arun". Further, it operates its own outlets under the brand name "IBACO" to sell ice creams, chocolates, and ice-cream cakes. Additionally, the company selectively retails milk and other milk products such as curd, ghee, butter, paneer, ice cream, chocolates, yoghurt, skimmed milk powder, lassi, buttermilk, cheese spread, and dairy whitener in various markets through its retail outlet under the brand name "HAP Daily". 

The company also manufactures and sells cattle feed under its own brand name "Santosa" to farmers through a procurement network. As of September 30, 2022, it has 19 processing and manufacturing plants primarily across the states of Tamil Nadu, Andhra Pradesh, Karnataka, Telangana, and Maharashtra, and 3491 "HAP Daily" retail outlets which are situated in various strategic locations across the states of Tamil Nadu, Karnataka, Kerala, Andhra Pradesh, Telangana, Maharashtra, Odisha, Goa, and the union territory of Pondicherry. As of September 30, 2022, it has a workforce of 11165 personnel which included 5353 full-time employees and 5812 contract employees.

ISSUE DETAILS:
To part finance its need for repayment/prepayment of certain borrowings (Rs. 285.80 cr.), and general corporate purposes (Rs. 10.00 cr.), HAPL is coming out with a rights issue (RI) of 7185444 equity shares of Re. 1 each at a fixed price of Rs. 419 per share to mobilize Rs. 301.07 cr. The company is offering the right shares in the ratio of 1 share for every 30 shares held by eligible stakeholders as of the record date of December 08, 2022. The issue opens for subscription on December 19, 2022, and will close on January 09, 203. The full amount is to be paid as application money while applying. Post allotment, shares will be listed on BSE and NSE. HAPL is spending Rs. 5.27 cr. for this RI process. 

The issue is solely lead managed by Axis Capital Ltd. while Link Intime India Pvt. Ltd. is the registrar of the issue. 

Post RI, HAPL's current paid-up equity share capital of Rs. 21.56 cr. will stand enhanced to Rs. 22.27 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 9333.17 cr. The paid-up equity capital is shown on a net basis after considering the forfeited shares. 

HAPL has issued bonus shares in the ratio of 1 for 2 (2012), 2 for 5 (2016), and 1 for 3 (2020). Thus it considers bonus issues at an interval of every 4 years. (inadvertently a Leap Year).

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, HAPL has posted a turnover/net profit of Rs. 5557.02 cr. / Rs. 273.58 cr. (FY21) and Rs. 6380.18 cr. / Rs. 248.25 cr. (FY22). 

As per the unaudited results submitted to the exchanges, HAPL has earned a net profit of Rs. 94.43 cr. on a turnover of Rs. 3770.81 cr. for H1 of FY23 for the period ended on September 30, 2022. Thus despite growth in the top line, it has posted declining trends in the bottom line for the last 18 months working. This erosion is attributed to higher provisioning of depreciation, interest outgo, and employees cost and an increase in input costs which could not be passed on to customers in full. 

DIVIDEND POLICY:
HAPL is a dividend-paying company. It has paid a dividend of 600% for FY21 and FY22. 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: 531531 (FV Re. 1).
The scrip last closed at Rs. 968.70 on December 06, 2022, as cum-right and opened at Rs. 954.55 as ex-right on December 07, 2022. Since then it has marked a high/low of Rs. 954.55 / Rs. 886.60 till now. It last closed at Rs. 900.00 as of December 16, 2022, and has marked the last 52 weeks' high/low of Rs. 1297.96 / Rs. 791.59. Considering RI at an attractive discount of around 53% on its last trading price, it is worth considering. The promoter's holding declined from 74.26% as of June 30, 2022 quarter to 73.00% as of September 30, 2022 quarter.

NOTE: As my family has a small long-term holding, we will participate in this RI for an eligible offer. 


Conclusion / Investment Strategy

HAPL is a well-known dairy product company from the southern region. It has been making strides in its performance in top lines. Its bottom line marked a decline following higher provisioning. As this RI is at a discount of around 53% on its last traded price, it is worth considering for medium to long-term rewards.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Dec 16, 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 Hatsun Agro Product Ltd RI Views / Analysis / Recommendations ...

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


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