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• ROML is engaged in the business of crushing, refining and filtering various types of oils.
• Post change in the management, it is on a recovery path.
• It has a NAV of Rs. 5.42 as of September 30, 2022, due to carried forward losses.
• The RI is at a discount of approx. 39.88% based on the last traded price*.
• Well-informed investors may consider parking funds for the long term.
ABOUT COMPANY:
Raj Oil Mills Ltd. (ROML) is engaged in the business of crushing, refining and oil filtration of various types of oils like coconut oil, groundnut oil, sunflower oil, mustard oil and various other oil products. Currently, the Company is running the oil filtration process plant by buying different types of raw filtered and refined edible oil from the suppliers, doing the oil filtration process in-house and catering the final products through its business partners i.e., super stockiest and distributors.
At present, the crushing and refining plant is not operational. Its manufacturing facility's strategic location enables it to procure key raw oil from suppliers at cheaper costs. The Company has also installed a DG set to augment the power requirements of the aforesaid processing facilities due to avoid any power outages. To ensure that ROML supplies quality products which meet the applicable standards, it has set up a quality control facility at its factory, which consists of quality assurance and quality control teams who check and conduct various tests on the products at various stages starting from the raw oil procured to the finished products manufactured. All its facilities are supplemented by utilities, such as water, power, etc. which makes it an important link between facilities.
ROML's aforementioned products are sold under three umbrella brands viz., 'Guinea' 'Cocoraj', and 'Raj' such as "Tilraj", "Mustraj" and "Divya Shakti". These brands are in existence for more than 7 decades. The Company acquired all intangible property viz. Brands, Trademarks and Copyrights from M/s Raj Oil Mills, partnership firm vide various agreements dated December 13, 2007, December 17, 2007, December 20, 2007, December 26, 2007, and December 31, 2007. Thus, the brands, 'Guinea', 'Cocoraj', and 'Raj' became part of ROML. Recently, it launched a new edible mustard oil under a different brand name "Khilona" on January 12, 2023, to cater for customers in Tier-II and Tier-III cities. The offer documents are silent on the company's employees' strengths.
ISSUE DETAILS:
The company is coming out with a rights issue (RI) of 14988684 equity shares of Rs. 10 each at a fixed price of Rs. 30 per share to mobilize Rs. 44.97 cr. It is offering RI in the ratio of 1 for 1 to eligible stakeholders as of the record date of February 09, 2023. The issue opens for subscription on February 21, 2023, and will close on March 13, 2023. The full amount is to be paid on the application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. ROML is spending Rs. 1.50 cr. for this RI process and from the net proceeds it will utilize Rs. 18.00 cr. for repayment/prepayment of certain unsecured borrowings, Rs. 17.00 cr. for working capital, and Rs. 8.47 cr. for general corporate purposes.
Saffron Capital Advisors Pvt. Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue.
Post-RI, ROML's current paid-up equity capital of Rs. 14.99 cr. will stand enhanced to Rs. 29.98 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 89.93 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a turnover/net profit of Rs. 103.54 cr. / Rs. 5.26 cr. (FY21), and Rs. 118.56 cr. / Rs. 2.60 cr. (FY22). For H1 of FY23, it earned a net profit of Rs. 1.23 cr. on a turnover of Rs. 59.48 cr. Due to losses carried forward for the earlier years, its current paid-up equity capital of Rs. 14.99 cr. has a negative reserve of Rs. - (21.65) cr. (as of September 30, 2022). Its NAV stands at Rs. - (5.42) per share as of September 30, 2022.
As per the unaudited results filed with the exchange, for 3Qs of FY23, it earned a net profit of Rs. 2.36 cr. on a turnover of Rs. 102.14 cr.
DIVIDEND POLICY:
The offer document is silent on the company's 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 NSE WEBSITE DATA: SCRIP CODE: DESTINY (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 64.75 on February 08, 2023, and opened on an ex-right basis at Rs. 49.75 on February 09, 2023. Since then, it has marked a high/low of Rs. 52.40 / Rs. 47.55. The scrip last closed at Rs. 49.90* as of February 13, 2023, as the counter is under restricted trade on account of IBV/Recommencement of IBC and is also under IRP - Stage 1.
For the last 52 weeks, it has posted a high/low of Rs. 69.94 / Rs. 39.35. The promoters' holding has been constant at 75% for the last three quarters ended on December 31, 2022. The counter is well managed above the par value to lure investors.
Note: My family has a small long-term holding in this company and hence may apply for the rights entitlement for eligible shares.
Review By Dilip Davda on February 18, 2023
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 the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their 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.
About Dilip Davda
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.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The Raj Oil Mills 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 Raj Oil Mills Rights Issue 2023 worth investing. The Raj Oil Mills Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if Raj Oil Mills Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Raj Oil Mills Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.
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