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Rajapalayam Mills RI review (Apply)

Rajapalayam Mills Limited Logo

•    RML is in the business of manufacturing and marketing yarns and fabrics. 
•    This is the second rights issue from the company since March 2021.
•    IT suffered a setback in FY21 on account of the pandemic.
•    Off late we are witnessing fancy for textile segment counters. 
•    Investment in this RI may be considered for medium to long-term rewards.

ABOUT COMPANY:
Rajapalayam Mills Ltd. (RML) is a part of the South India-based Ramco Group, incorporated in 1936 and founded by P. A. C. Ramasamy Raja. The company is engaged in the business of manufacturing yarn ranging from 4s to 345s (single/multiple yarns) and fabrics. Presently, it has four manufacturing facilities for yarn and one manufacturing facility for fabric. Its spinning units are located at Rajapalayam in Virudhunagar district and Perumalpatti in Thirunelvelli district of Tamil Nadu.

RML has also established a fabric unit based at Rajapalayam in the Virudhunagar district of Tamil Nadu which began commercial production in March 2020. At present, the company has an installed capacity of 1,51,808 spindles in Ring Spinning and 2,960 rotors in Open End Spinning. It has a capacity of 154 looms with a greige fabric production capacity of 28,452 mtrs/day and is in the process of expanding existing capacity by installing 166 additional looms with a greige production capacity of 38,897 mtrs/day under the new project which will enable the company to increase its capacity to 320 looms along with greige fabric capacity to 67,350 mtrs/day. Further, the company is in the process of establishing fabric finishing infrastructure which will enable the company to produce finished fabric of 50,000 mtrs/day. 

RML manufactures a wide range of products like Open End yarn, Ring yarn, Compact yarn, TFO yarn, Gassed yarn, Mercerised yarn, Slub yarn, Multi Count yarn, Melange yarn, Dyed Yarn, High Twist yarn, Core Spun yarn and Elitwist yarn. Its products are tailor-made to cater to specific customer needs and the company sells its products in domestic as well as international markets. RML is also engaged in the generation of electricity from windmills. It has an aggregate installed capacity of 35.15 megawatts (MW) of wind power facilities which are used for captive consumption, and this helps it to reduce power costs. Its windmills are located in Dhanakkarkulam, Irukkandurai, Uthumalai, Aralvaimozhi, Chinnaputhur, Kozhumankondan, Melkaraipatty, Muthunaickenpatti district of Tamil Nadu. As of September 30, 2022, it has 4491 employees on its payroll.

ISSUE DETAILS:
This is the 2nd RI from RML since March 2021. This time, the company is offering a rights issue (RI) of 614680 equity shares of Rs. 10 each at a fixed price of Rs. 569 per share to mobilize Rs. 34.98 cr. RML is issuing 1 share against 14 shares held by the eligible shareholders as of the record date of December 30, 2022. The issue is opening for subscription on January 18, 2023, and will close on February 07, 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. 0.53 cr. for this RI, and from the net proceeds, it will utilize Rs. 34.45 cr. for the expansion and modernization of its existing units/infrastructures. 

This RI is solely lead managed by Vivro Financial Services Pvt. Ltd., and Cameo Corporate Services Ltd. is the registrar of the issue. 

Post-RI, RML's current paid-up equity capital of Rs. 8.61 cr. will stand enhanced to Rs. 9.22 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 524.63 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, RML has (on a consolidated basis) posted a turnover/net profit (loss) of Rs.418.36 cr. / Rs. - (37.39) cr. (FY21), Rs. 705.26 cr. / Rs. 18.84 cr. (FY22). It suffered a setback in FY21 on account of the pandemic.

As per BSE filings, for H1 of FY23 (unaudited consolidated results), it posted a net profit of Rs. 25.02 cr. on a turnover of Rs. 423.59 cr.

DIVIDEND POLICY:
The company is a dividend-paying company. It paid a dividend of 10% for FY20 and FY22, and 5% for FY21. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 532503 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 721.20 on December 29, 2022, and opened at Rs. 705.00 on an ex-right basis on December 30, 2022. Since then, it marked a high/low of Rs. 731.00 /Rs. 663.60. The scrip last closed at Rs. 701.35 on January 13, 2023. The scrip has posted the last 52 weeks' high/low of Rs. 1378.43 / Rs. 663.60. The promoter's shareholding has been constant at 55.12% for the last three quarters ended in September 2022. The RI is at a discount to its current trading price and is worth considering. 


Conclusion / Investment Strategy

RML is in the business of manufacturing and marketing yarn and fabrics. Off late we are witnessing fancy for textile segment counters. This RI is at a discount to its current market price. It is worth considering for medium to long-term investment.

Reviewer recommends Subscribing to the issue.

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 Rajapalayam Mills Limited RI Views / Analysis / Recommendations ...

The Rajapalayam Mills Rights Issue 2022 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 Rajapalayam Mills Rights Issue 2022 worth investing. The Rajapalayam Mills Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Rajapalayam Mills Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Rajapalayam Mills Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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