KDDL Rights Issue review (Subscribe for Long Term)

  • A dominant Indian player in watch and accessories manufacturing.
  • It has over 60% exports revenue with good margins.
  • It suffered setback due to Covid-19 pandemic.
  • Right issue proceed will be used to promote its Ethos venture.
  • Investment with long term perspective may be considered.

ABOUT COMPANY

KDDL Ltd. (formerly known as Kamla Dials & Devices Ltd.) (KDDL) is engaged in the manufacturing of watch components and precision engineering products. The Company has been engaged in the manufacture watch components i.e. watch dials and watch hands over three decades and is considered to be one of India's leading watch components manufacturers for others.

To enhance presence in mid-priced segment and European brands, it recently acquired Estima AG, an

established maker of watch hands in Switzerland. It has a strong customer profile and cater to some of the leading watch manufacturing companies in India and Switzerland. KDDL also cater to various industries like automobile, electrical and electronics, consumer durables, industrial engineering, instrumentation, aerospace and defence industry through precision engineering product manufactured at its precision stamping division facility in Bengaluru, Karnataka and supplies critical products like electrical connectors and terminals, component of relays for aerospace application, electrical switch gears, cell phone chargers, battery and components for automobile sector etc.

It is also involved in the business of manufacturing of ornamental packaging boxes for watch, jewellery and writing instruments. As on December 31, 2020, it had 1,358 permanent full-time employees at its manufacturing facilities and corporate office.

As of December 31, 2020, it had a network of 47 stores across the India, of which 9 Ethos Summit watch stores are exclusive high luxury end brand stores at Mumbai, Delhi, Hyderabad, Chennai, Kolkata, Lucknow, Bengaluru and Chandigarh and 1 duty free retail store at Delhi International Airport. The company also merchandising and managing a duty paid retail store at Domestic Airport, Mumbai. KDDL focuses on retailing of luxury watch brands through strategically located stores at metros, Tier I and Tier II cities. The company is generating over 60% of revenue from exports primarily supplying to various Swiss and other international watch brands.

ISSUE DETAILS

To part finance its plans to fund working capital of its subsidiary Ethos Ltd. (Rs. 18.75 cr.) and general corpus fund needs (Rs. 5.33 cr.), the company is coming out with a rights issue of equity share of Rs. 10 each with a fixed price of Rs. 230 per share to mobilize Rs. 25 crores. The company is offering 7 right shares for every 75 shares held as on record date of March 31, 2021. KDDL is issuing 1086956 shares under this offer and will spend Rs. 0.92 cr., for the entire process. The issue opens for subscription on April 09, 2021 and will close on April 23, 2021. Post allotment, shares will be listed on BSE and NSE.

The issue is solely lead managed by ITI Capital Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue.

Post issue, its current paid up equity capital of Rs. 11.65 cr. will stand enhanced to Rs. 12.74 cr. At the rights issue pricing, the company is looking for a market cap of Rs. 292.95 cr., and based on its last traded price of Rs. 262.50 (as of April 07, 2021), market cap comes to Rs. 334.35 cr.

FINANCIAL PERFORMANCE

On the financial performance aspect, KDDL has (on a consolidated basis) posted turnover/net profit (Loss) of Rs. 658.95 cr. / Rs. - (1.95) cr. (FY20). For the first nine months ended on December 31, 2020 of FY21, it has reported net loss of Rs. - (2.09) cr. On a turnover of Rs. 386.36 cr. Management attributed losses for higher provisioning for interest and depreciation as well as partial impact of Corona Pandemic. The company is on recovery path as indicated by Q3 results of FY21 for which it posted a net profit of Rs. 9.71 cr. On a turnover of Rs. 182.27 cr.

SHARE PRICE MOVEMENTS

KDDL's share turned ex-right on March 30, 2021 at Rs. 272.50 per share. It last closed cum-right at Rs. 271.90 on March 26, 2021. After going ex-right, the scrip has moved in the range of Rs. 284.95 to Rs. 250.00. It has marked 52 weeks high/low of Rs. 315 / Rs. 210 (on ex-right basis).


Conclusion / Investment Strategy

KDDL is a dominant player in watches and accessories from India and has been fancied by investors across the board. If we look at its recent price movement, the offer at Rs. 230 appears somewhat cheaper. Investors may consider investment with a long term perspective in this rights offer.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Apr 7, 2021

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


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