• The company is in the business of manufacturing and processing of cotton seed meal cake, cattle feed and soya bean meal.
• It is operating in a highly competitive and fragmented segment.
• It posted minor gains in bottom lines on a static top lines for the last two fiscals.
• The sudden boost in Q1-FY25 bottom line raises eyebrows and concern over its sustainability going forward.
• Well-informed investors may park moderate fund for long term.
ABOUT COMPANY:
Narmada Agrobase Ltd. (NAL) is engaged in manufacturing & processing of cotton seed meal cake, cattle feed and soya bean meal. The products manufactured by the Company are used for feeding of cattle which provides high amount of proteins and other nutrients required by them. Also the By-products is used in Textile Industry, Consumer Goods Industry and Paper Industry.
NAL is manufacturer and exporter of cotton seed meal, guar meal, delinted cotton seed, organic fertilizers and cattle feed under own brand name of "Ladoo", "Narmada", "Narmada Kala Sona", "Narmada Super", "Super Narmada" "Churma" and "Gaay Chhaap". The Company has a flagship brand which commands a high reputation worldwide for quality products, efficient services and level of reliability as a stable supplier of quality products in Cattle Feed Industries. The products offered by it are processed using quality ingredients sourced from the Quality Assurance team after properly graded and processed.
The Products are processed under Quality certified manufacturing unit and supplied in air tight & hygienic packs which makes its Products in accurate composition, precise pH value, effectiveness and longer shelf life. Its Plant is highly sophisticated with modern pulverization and Pneumatic system with additional essential equipments having blenders directly communicated with plant of capacity 125 Metric Tons in a day to provide homogeneous qualities. The manufacturing process is totally automatic, continuous without manual touch and finished goods directly go into the bags. Its quality products have several uses like meal can be used for fertilizers and animal feed, Cotton linters which is by product cotton seed which can be used in various industries like furniture, paper, yarns, absorbent cotton etc. The offer document is silent on its employees' strength.
ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 24387685 equity shares of Rs. 10 each at a fixed price of Rs. 15 per share to mobilize Rs. 36.58 cr. The RI opens for subscription on September 30, 2024, and will close on October 09, 2024. The company is offering RI in the ratio of 9 for 5 to its eligible stakeholders as of the record date of September 16, 2024.The full amount is to be paid on application for number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 2.00 cr. for this RI process, and from the net proceeds, it will utilize Rs. 17.87 cr. for Working capital, Rs. 7.70 cr. for acquisition of land, construction of oil mill plant and other related work, and Rs. 9.01 cr. for general corporate purposes.
The issue is self-managed by the company and Cameo Corporate Services Ltd. is the registrar to the issue. KFin Technologies Ltd. is the registrar to the company.
Post-RI, company's current paid-up equity capital of Rs. 13.55 cr. will stand enhanced to Rs. 37.94 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 56.91 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total revenue/net profit of Rs. 50.08 cr. / Rs. 0.65 cr. (FY23), and Rs. 50.39 cr. / Rs. 1.02 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it earned a net profit of Rs. 1.01 cr. on a total revenue of Rs. 12.27 cr. The boosted bottom line for Q1-FY25 raises eyebrows and concern over its sustainability going forward.
DIVIDEND POLICY:
The offer document is silent on its dividend policy. 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: 543643 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 24.32 on September 12, 2024, and opened on an ex-right basis at Rs. 18.32 on September 13, 2024. Since then, it has marked high/low of Rs. 20.89 / Rs. 18.00. The scrip last closed at Rs. 18.45 as of September 27, 2024. For the last 52 weeks' it has posted a high/low of Rs. 26.28 / Rs. 12.48.
The promoters' holding has declined to 57.66% for the last quarter ended on June 30, 2024, against 63.57% for quarter ended March 31, 2024. The counter is well managed and quoting above the RI price, to tempt investors.
Review By Dilip Davda on September 28, 2024
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
