Nagreeka Exports RI review - (Apply)

•    NEL is in the business of manufacturing and trading of cotton and speciality yarn.
•    For the reported periods it derived on an average 60% revenue per year from exports. 
•    The RI is at a discount of around 46.3% to its current market price.
•    Investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
Nagreeka Exports Ltd. (NEL) is a part of the Nagreeka Group, incorporated in 1953. Incorporated in 1989, the Company is presently engaged in the business of manufacturing and trading of cotton yarn and speciality yarn ranging from 6s to 80s (single/multiple yarn) and fabrics. Its spinning unit is located at Kolhapur district of Maharashtra. 

At present, the Company has an installed capacity of 55,440 spindles in Ring Spinning. The manufacturing facility also houses the state-of-the-art Reiter, LMW and other machines to manufacture speciality yarn of various counts, it also has Uster & other equipment in the quality lab to ensure that there is monitoring of each stage of the production process so that there are enough data points for continuous improvement of the products.

The Company manufactures and Trades wide range of products like, Ring yarn, Compact yarn, TFO yarn, Open End yarn, Gassed yarn, Mercerized yarn, Slub yarn, Multi Count yarn, Melange yarn, Dyed Yarn, High Twist yarn, Core Spun yarn and Elitwist yarn. It has also set up textile processing plant at Kagal Kolhapur District of Maharashtra. Its products are tailor-made to cater specific customer needs and sells products in domestic as well as international markets. 

Exports accounted for 60.80%, 49.23% and 67.33% of Revenue from Operations for the six months' period ended September 30, 2023 and for Fiscals 2023 and 2022 respectively. The export sales on this scale are possible due to its global distribution network. As on September 30, 2023, it had marketing team and established marketing network of agent across India and in about 40 counties across the globe. As of September 30, 2023, it had 800 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with Rights Issue (RI) of 18749550 equity shares of Rs. 5 each at a fixed price of Rs. 20 per share to mobilize Rs. 37.50 cr.  The RI opens for subscription on February 12, 2024, and will close on February 23, 2024. The company is offering RI in the ratio of 3 for 2 to its eligible stakeholders as of the record date of January 30, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 0.64 cr. for this RI and from the net proceeds, it will utilize Rs. 12.20 cr. for repayment of certain borrowings, Rs. 10.00 cr. for redemption of outstanding NCDs by promoters, Rs. 5.92 cr. for capital expenditure, and Rs. 8.74 cr. for general corporate purposes. 

The issue is solely lead managed by Prime Securities Ltd. and Maheshwari Datamatics Pvt. Ltd. is the registrar of the issue. 

Post-RI, company's current paid-up equity capital of Rs. 6.25 cr. will stand enhanced to Rs. 15.63 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 62.50 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit of Rs. 552.65 cr. / Rs. 6.19 cr. (FY22), Rs. 390.79 cr. / Rs. 3.04 cr. For H1 of FY24, it earned a net profit of Rs. 3.37 cr. on a total income of Rs. 268.39 cr. Thus the first half performance indicates likely trends going forward.

DIVIDEND POLICY:
The company has not declared any dividends from FY15 onwards. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 521109 (FV Rs. 5).
The scrip last closed on cum-right basis at Rs. 81.60 on January 29, 2024, and opened on an ex-right basis at Rs. 43.75 on January 30, 2024. Since then, it has marked a high/low of Rs. 43.75 / Rs. 37.25. The scrip last closed at Rs. 37.25 as of February 09, 2024. For the last 52 weeks' it has posted a high/low of Rs. 44.64 / Rs. 15.81.  The counter is currently under ESM: Stage 2.

The promoters' holding has been constant at 52.87% for the last three quarters ended with December 31, 2023. The counter is well managed above the RI price to lure investors.