PRICOL RIGHT ISSUE review (May apply)

Pricol Limited Logo

•    PRICOL is engaged in manufacturing of automotive components.
•    The company supplies its vided range products globally to OEMs.
•    It has discontinued and parted with the loss-making operations
•    Rights issue is offered at around 40% discount to last traded price (as on November 27, 2020)

PRICOL Ltd. (PRICOL) is one of the leading manufacturers of automotive components in India, catering primarily to automotive OEMs, both domestically and overseas. It manufactures a wide range of technology-intensive electronic and mechanical automotive products. These have applications across vehicle segments, including for two-wheelers, three-wheelers, four-wheeler passenger vehicles, light commercial vehicles, heavy commercial vehicles, and tractors. PRICOL also caters to the construction equipment segment in the global market.

Company's diversified product portfolio includes three major verticals i.e. Driver Information System, Pumps and Mechanical Products, Switches and Sensors.  It also manufactures and supplied wiper and wiper motors through its subsidiary. The company has seven manufacturing plants, five in India and two in Indonesia (owned and operated by its subsidiaries).

To part finance its need of working capital (Rs. 65.00 cr.) and general corpus funds (Rs. 14.27 cr.), PRICOL is coming out with a rights issue of 27084777 equity share of Re. 1 each at a fixed price of Rs. 30 per share to mobilize Rs.81.25 cr. The company is offering 2 shares against 7 shares held by the shareholders as on the record date of November 24, 2020. The issue opens for subscription on December 03, 2020, and will close on December 17, 2020. Post allotment, shares will be listed on BSE and NSE.

PRICOL is spending Rs. 1.98 for the entire issue process.

The issue is solely lead managed by Centrum Capital Ltd. while Integrated Registry Management Services Pvt. Ltd. is the registrar to the issue

Post issue, the company's current paid-up equity capital of Rs. 9.48 cr. will stand enhanced to Rs. 12.19 cr.

While based on its last traded price of Rs. 49.90, the market cap is Rs. 608, with the offer price; the company is looking at a market cap of Rs. 366 cr.

In the month of July 2020, PRICOL discontinued some of its subsidiary business. This deal brought a profit of Rs. 25.67 cr. in Q2 of FY21. With the help of these gains, the company reported a net profit of Rs. 18.67 cr. for H1 of FY 21 on a turnover of Rs. 511.05 cr. For FY20 it reported a turnover of Rs. 1257.25 cr. with a loss of Rs. - (25.94) cr. on standalone and loss of Rs. - (98.75) cr. with working of discontinued subsidiaries.

On a consolidated basis, PRICOL posted turnover/net profit (loss) of Rs. 1826.27 cr. / Rs. - (93.74) cr. (FY19) and Rs. 1614. 68cr. / Rs. - (46.74) cr. (FY20) and bottom line stood at Rs. - (173.86) cr. and Rs. - (98.75) cr. respectively, with discontinued subsidiaries contributions.

PRICOL LTD. (BSE CODE -540293) (NSE SYMBOL-PRICOLLTD), scrip closed at Rs. 60.00 on cum-right basis on November 23, 2020, and opened at Rs. 55.00 ex-right on November 24, 2020. Since going ex-right it moved between Rs. 55 - Rs. 47.20 between November 24 - November 27, 2020, and closed at Rs. 49.90 at the close of November 27, 2020 (as per BSE Website).

Conclusion / Investment Strategy

Considering offer price at a discount of around 40% to the last traded price in the market, the issue may be considered for investment with long term perspective.

Review By Dilip Davda on Nov 28, 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.

Email: dilip_davda@rediffmail.com

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