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Pacific Ind RI review (May apply)

Pacific Industries Limited Logo

•    PIL is in the business of granite mining and processing. 
•    It has posted a setback for H1 of FY23.
•    RI at a big discount to its last traded price looks appealing.
•    Well-informed investors may park funds for medium to long-term rewards.

ABOUT COMPANY:
Pacific Industries Ltd. (PIL) started its business in the field of Granite mining and Granite Processing with gang saw and polishing machines at Udaipur, Rajasthan. Thereafter the Company set up a new granite processing plant in Bangalore, Karnataka in the year 1995. Both the Udaipur and Bangalore units have been operating as 100% Export Oriented Units since inception. Further, in 2019, the company assessed the change in the market scenario of a shift from natural to manmade stones and thus diversified its business into manufacturing engineered quartz. The diversification has helped the
company to cater to the needs of existing customers as well as help in onboarding new customers. 

The major source of revenue continues to be the sale of natural stones and man-made surfaces for the Company. PIL is currently engaged in the business of processing natural stones and manufacturing engineered quartz. Natural stones are produced by complex geological processes and include a number of products such as granite, limestone, marble, slate, quartzite, onyx, sandstone, travertine, and others that are quarried from the earth. Natural stones are widely known for their uniqueness, aesthetic appeal, texture, colour, and composition as no two natural stones are the same. Engineered quartz, on the other hand, is an example of engineered stone used in the countertop industry, which is a composite material made up of crushed stone bonded by an adhesive. For instance, for countertops, the slabs are made from quartz crystals bonded with a resin binder. As of September 30, 2022, it has 180 employees on its payroll.

ISSUE DETAILS:
This is the 2nd RI from PIL since July 2019. This time, the company is offering a rights issue (RI) of 3446325 equity shares of Rs. 10 each at a fixed price of Rs. 139 per share to mobilize Rs. 47.90 cr. PIL is issuing 1 share against 1 share held by the eligible shareholders as of the record date of January 11, 2023. The issue opens for subscription on January 19, 2023, and will close on February 02, 2023. The full money is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.55 cr. for this RI, and from the net proceeds, it will utilize Rs. 26.26 cr. for repayment of unsecured loans from related parties, Rs. 11.74 cr. for working capital, and Rs. 9.45 cr. for general corporate purposes. There appears to be some mismatch (due to rounding off) in the Offer size and the data of Objects of the Issue. 

This RI is solely lead-managed by Srujan Alpha Capital Advisors LLP, and Link Intime India Pvt. Ltd. is the registrar of the issue. 

Post-RI, PIL's current paid-up equity capital of Rs. 3.45 cr. will stand enhanced to Rs. 6.89 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 95.81 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, PIL has (on a consolidated basis) posted a turnover/net profit (loss) of Rs. 185.86 cr. / Rs. 10.41 cr. (FY21), Rs. 293.42 cr. / Rs. 15.92 cr. (FY22).  As per BSE filings, for H1 of FY23, it posted a net profit of Rs. 4.09 cr. on a turnover of Rs. 129.12 cr. against a net profit of Rs. 13.94 cr. on a turnover of Rs. 172.92 cr. for the corresponding previous period. It has posted a setback for the H1 of the current fiscal. 

DIVIDEND POLICY:
The company has not declared any dividends so far. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 523483 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 461.20 on January 10, 2023, and opened at Rs. 286.00 on an ex-right basis on January 11, 2023. Since then, it marked a high/low of Rs. 286.00 /Rs. 241.00. The scrip last closed at Rs. 247.40 on January 13, 2023. The scrip has posted the last 52 weeks' high/low of Rs. 391.90 / Rs. 202.53. The counter is well managed with a thin volume. The promoter's shareholding has been constant at 73.99% for the last three quarters ended in September 2022.


Conclusion / Investment Strategy

The company has been in the business of granite mining and processing. As the realty sector is set for a boom period ahead, this company may reap benefits. Though its FY23 results show a setback, RI at a discounted price to its last traded price is appealing. Well-informed investors may consider parking funds with medium to long-term perspectives.

Review By Dilip Davda on Jan 15, 2023

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 Pacific Industries Limited RI Views / Analysis / Recommendations ...

The Pacific Industries Rights Issue 2023 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 Pacific Industries Rights Issue 2023 worth investing. The Pacific Industries Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if Pacific Industries Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Pacific Industries Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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