Rushil Decor Rights Issue review - (May apply)

•    RDL manufactures laminates, MDF and PVC based products.
•    For the last three fiscals, its top line and bottom lines have shown inconsistency.
•    Based on financial parameters, the issue is priced reasonably.
•    Investors have the option of paying 25% of the issue price in four instalments for this offer.

ABOUT COMPANY
Rushil Décor Ltd. (RDL) is engaged into manufacturing of Laminates, MDF and PVC in its manufacturing facilities located at Gujarat, Karnataka and Andhra Pradesh. The Company manufactures decorative (single-sided) as well as industrial (double-sided) Laminates with a wide range of designs, colours and finishing in three of its manufacturing plants located at Gujarat having aggregate Laminate capacity of 34.9 lakh sheets per annum. RDL also manufactures standard thick MDF Boards and Pre Lam MDF Boards at its plant located at Chikmagalur, Karnataka.

ISSUE DETAILS:
To part finance its plans for repayment/prepayment of unsecured loans brought in by promoters and promoters group (Rs. 18.32 cr.), General corpus fund (Rs. 6.22 cr.), RDL is coming out with a rights issue of 4977111 equity shares of Rs. 10 each at a fixed price of Rs. 50 per share to mobilize Rs. 24.89 cr. It is offering 1 right share against 3 equity shares held as on September 11,, 2020. The issue opens for subscription on September 21, 2020, and will close on October 05, 2020. RDL is likely to incur expenses of Rs. 0.35 cr. for this rights issue process.

Applicants have to pay 25% of the Issue price i.e. Rs.12.50 along with the application and the balance amount will be payable by the Rights Equity Shareholders on three subsequent Calls of Rs. 12.50 each per Rights Equity Share, pursuant to the Payment method after payment of the Application Money.

Currently, the promoter's holding in the company is 53.24% (as on September 07, 2020).

Scrip turned ex-right on September 10, 2020, at Rs. 104.95 (at the opening) and Rs. 84.20 (at the closing) against its cum right quote of Rs. 101.35 on September 09, 2020 (at the close). Last trading price of the scrip is Rs. 83.05 (as on September 14, 2020 close).

The issue is solely lead managed by Saffron Capital Advisors Pvt. Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE.

Post issue, RDL's current paid-up equity capital of Rs. 14.93 cr. will stand enhanced to Rs. 19.91 cr. Based on its rights issue offer price RDL is looking at a market cap of Rs.99.54 cr. with expanded equity.

At the last traded price of Rs. 83.05 its market cap on fully diluted equity comes to Rs. 165.34 cr. Scrip has marked last 52 week's high/low of Rs. 156.18 / Rs. 57.53.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, RDL has posted turnover/net profits of Rs. 353.68 cr. / Rs. 30.92 cr. (FY18), Rs. 352.23 cr. / Rs. 14.33 cr. (FY19) and Rs. 339.13 cr. / Rs. 23.05 cr. (FY20). For FY18 and FY19, it posted a static top line with the declining bottom line. For FY20 it has shown a decline in top-line but marked improvement in the bottom line.

For Q1 of FY21, RDL has posted a loss of Rs. 3.62 cr. on a turnover of Rs. 49.07 cr. that raises concern for near term performance of the company.

For the last three fiscals, RDL has posted an average EPS of Rs. 14.47 and an average RoNW of 11.41%. The issue is priced at a P/BV of 0.36 based on its NAV (Net Asset Value) of Rs. 140.24 as on March 31, 2020, and at a P/BV of 0.43 based on post issue NAV of Rs. 117.76.

If we attribute FY20 earnings on fully diluted equity post this issue, then asking price is at a P/E of around 4.32 against the industry average of 10.16, making this offer reasonably priced.