Minda Industries Rights Issue Review (May apply)

Minda Industries Limited Logo

•    MIL is engaged in manufacturing and supply of automotive systems to OEMs.
•    For fiscal 2019-20, it suffered a setback in the top and bottom lines.
•    The company enjoys market preference for its quality products.
•    Investors may consider investing in this offer with a long term perspective.

Minda Industries Ltd. (MIL) is a manufacturers and suppliers of a variety of automotive systems to OEMs and manufacturers of automotive horns. The company manufactures and supplies automotive components to leading Indian and international OEMs based in India, ASEAN, North America and Europe. It enjoys a market preference for its quality products.

As of March 31, 2020, the Company has 24 Subsidiaries (including one partnership firm), four Associates (including two partnership firms) and nine Joint Ventures. It does not have a holding company.

To part finance its plans for repayment and/or prepayment of all or of a portion of the principal and / or interest of certain borrowings (Rs. 154 cr.), investment in its JV (Joint Venture) Toyoda Gosei Minda India Pvt. Ltd. (Rs. 33.46 cr.) and general corpus funds (Rs. 52.92 cr.), MIL is coming out with a rights issue of 9711739 equity shares of Rs. 2 each at a fixed price of Rs. 250 per share to mobilize Rs. 242.79 cr. It is offering 1 right share against 27 equity shares held as on August 17, 2020. The issue opens for subscription on August 25, 2020, and will close on September 08, 2020. Currently, the promoter's holding in the company is 70.79% (as on June 30, 2020). MIL is likely to spend Rs. 2.41 cr. for this rights issue process.

Scrip turned ex-right on August 14, 2020, at Rs. 283.50 (at the opening) and Rs. 285.20 (at the closing) against its cum right quote of Rs. 290.85 on August 13, 2020(at the close).

The issue is jointly lead managed by Equirus Capital Pvt. Ltd. and Axis Capital Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.

Post issue, MIL's current paid-up equity capital of Rs. 52.44 cr. will stand enhanced to Rs. 54.39 cr. Based on its rights issue offer price MIL is looking at a market cap of Rs.6798.22 cr. with expanded equity. At the last traded price of Rs. 285.20 its market cap on fully diluted equity comes to Rs.7755 cr. Scrip has marked last 52 week's high/low of Rs. 423.72/Rs.208.25.

On the financial performance front, for the last three fiscals, on a consolidated basis, MIL has posted total revenue/net profits of Rs.4581.64 cr. / Rs. 330.86 cr. (FY18), Rs. 5935.12 cr. / Rs. 339.48 cr. (FY19) and Rs. 5504.39 cr. / Rs. 187.71 cr. (FY20). It suffered a setback in the top and bottom line for the concluded fiscal 2019-20.

The issue is priced at a P/BV of 3.61 based on its NAV (Net Asset Value) of Rs. 69.24 as on March 31, 2020.

Conclusion / Investment Strategy

Following slowdown in automobile segment due to COVID-19 pandemic, this company too suffered and may post dismal performance for Q1 of FY21. However, considering promoter's holding above 70%, there is no harm in considering this offer with a long term perspective.

Review By Dilip Davda on Aug 15, 2020

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.


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