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Rajapalayam Mills Rights issue review (Apply)

Rajapalayam Mills Limited Logo


•    The company is a part of a well-known Ramco group.
•    It has posted steady growth in its performance amidst all odds.
•    The rights offer is at lucrative pricing.
•    After the expansion, it will mark speedy growth.
•    A good offer 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. It is engaged in the business of manufacturing of cotton yarn ranging from 4s to 355s (single/double yarn) and fabrics. Presently, it has four manufacturing facilities of cotton yarn and one manufacturing facility of fabric. Its spinning units are located at Rajapalayam in Virudhunagar district and Perumalpatti in Thirunelvelli district of Tamil Nadu. The company has also established a fabric unit based at Rajapalayam in Virudhunagar District of Tamil Nadu in which it began commercial production in March 2020. At present, the Company has an installed capacity of 1,33,616 spindles in Ring Spinning and 5,480 rotors in Open End Spinning. Further, its fabric unit has a capacity of 122 looms.

The Company 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 High Twist yarn, Core Spun yarn and Elitwist yarn. RML's products are tailor-made to cater to specific customer needs and it sells products in domestic as well as international markets. The company is also engaged in the generation of electricity from windmills. It has an aggregate installed capacity of 35.15 megawatts (MW) wind power facilities which it uses for captive consumption and this helps it to control power costs. RML's wind mills are located in Dhanakkarkulam, Irukkanthurai, Uthumalai, Aralvoimozhy, Chinnaputhur, Kolumakondan, Melkaraipatti, Muthunayakkanpatti district of Tamil Nadu

ISSUE DETAILS:
To part finance its plans for modernization of existing plant (Rs. 38.82 cr.), setting up of new mercerising machine (Rs. 16.32 cr.) and general corpus fund needs (Rs. 14.11 cr.), RML is coming out with a rights issue in the ratio of 1 for every 6 shares held as of record date of March 05, 2021. The company will be issuing 1229360 shares of Rs. 10 each at a fixed price of Rs. 569 per share to mobilize Rs. 69.95 cr. The issue opens for subscription on March 15, 2021, and will close on March 30, 2021. Post allotment, shares will be listed on BSE.

The issue is solely lead managed by Vivro Financial Services Pvt. Ltd., and Cameo Corporate Services Ltd. Is the registrar to the issue Post this issue, RML's current paid-up equity capital of Rs. 7.38 cr., will stand enhanced to Rs. 8.61 cr. With the rights offer pricing, the company is looking for a market cap of Rs. 489.65 cr., whereas on the basis of its last traded price of Rs. 730.25 (as of March 12, 2021) market cap stands at Rs. 628.42 cr. RML will be spending Rs. 0.70 cr., for this rights issue process.

FINANCIAL PERFORMANCE:
On the financial performance front, on a consolidated basis, RML has posted turnover/net profits of Rs. 156.60 cr. / Rs. 104.47 cr. (FY19) and Rs. 146.69 cr. / Rs. 92.07 cr. (FY20). For the first nine months of the current fiscal ended on December 31, 2020, it has earned net profit of Rs. 68.79 cr., on a turnover of Rs. 123.15 cr.    

SCRIP MOVEMENTS:
The scrip last quoted cum-right at Rs. 796.00 on March 03, 2021, and then closed ex-right on March 04, 2021, at Rs. 739.65 per share. Since then, it has moved between Rs. 788.40 and Rs. 725.05 with last closing price of Rs.730.60 on March 12, 2021. It has posted the last 52 week high/low of Rs. 790.22/Rs. 374.01 (on ex-rights basis).


Conclusion / Investment Strategy

This issue is worth subscribing with a medium to long term perspective as the company has good fundamentals as well as steady growth. Post expansion, it will be set for speedy growth in its working.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Mar 13, 2021

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