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Shivam Auto Right Issue review (May apply)

Shivam Autotech Limited Logo

•    SAL is engaged in the manufacturing of automobile components/parts.
•    The company has posted dismal performance for the reported periods.
•    Considering losses incurred for the last two and half years, its asking price is on the higher side. 
•    Investors may consider investment for the long term. 

Shivam Autotech Ltd. (SAL) is a manufacturer of transmission gears and shafts in India, serving various automobile manufacturers as their strategic and supply chain partners. From manufacturing gears for motorcycles since its incorporation to developing critical components for aerospace, the Company has diversified into multiple verticals and initiated exports as well.

The Company is involved in the manufacture of precision engineered components and systems, primarily used in the automotive sector. The Company operates within the Automotive Industry, which is well-established both domestically as well as internationally. It operates at Tier 1 level and Tier 2 level within the industry supply chain hierarchy and is an active participant in international trading, both as an importer and exporter.

The Company manufactures a comprehensive range of auto components and accessories that primarily include transmission gears, transmission shafts, alternator components, starter motor components, magneto components and steering components which are being produced through cold, warm and hot forging employing near net shape technology. The Company is an IATF 16949:2016, ISO 45001:2018 & ISO 14001:2015 certified for the manufacture of forged, machined and heat-treated components. The Company also holds the AS 9100- Rev D certification, which makes the Company eligible for supplying to all aerospace industries.

The Company has invested in state-of-the-art facilities in Bangalore and Rohtak to indigenize products for automobiles. This development gives the Company an opportunity for future exports to different overseas customers and is also a step towards the 'Make in India' initiative. The Company is promoted by DMIPL. (Dayanand Munjal Investments Pvt. Ltd.)

To part finance its needs for working capital (Rs. 8.00 cr.), adjustment of unsecured loans (Rs. 30.00 cr.) and general corporate purpose (Rs. 1.70 cr.), SAL is coming out with a rights issue (RI) of 22222222 equity shares of Rs. 2 each at a fixed price of Rs. 18 per share to mobilize Rs. 40.00 cr. The issue opens for subscription on December 31, 2021, and will close on January 28, 2022. While the company has not appointed any merchant banker for this issue and is handing it on its own, Bigshare Services Pvt. Ltd. is the registrar to the issue. The company is offering 2 right shares for every 9 shares held on the record date of December 10, 2021. Post allotment, shares will be listed on BSE and NSE.  SAL will be spending Rs. 0.30 cr. for this RI process. 

Post RI, SAL's current paid-up equity capital of Rs. 20 cr. will stand enhanced to Rs. 24.44 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 220 cr. As of September 30, 2021, promoters' holding was 74.80%.

On the financial performance front, for the last two fiscals, SAL has posted turnover/net profits of Rs. 588.88 cr. / Rs. - )37.13) cr. (FY20) and Rs. 490.93 cr. / Rs. - (22.53) cr. (FY21). For the first quarter of FY22 ended on June 30, 2021, it has incurred a loss of Rs. - (13.10) cr. on a turnover of Rs. 114.23 cr. The company has been posting losses for the reported periods. 

The company has not declared any dividend for the reported periods. It will adopt a prudent dividend policy going forward based on its financial performance and future prospects. 

The scrip closed on cum-right basis at Rs. 29.00 on December 08, 2021, and opened ex-right basis at Rs. 27.00 on December 09, 2021, since then it has posted a high/low of Rs. 31.00 / Rs. 23.40. It has marked 52 weeks' high/low of Rs. 34.35 / Rs. 13.97. Its last closing price is Rs. 30.65 as of December 30, 2021. Based on this price, its market cap stands at Rs. 374.61 cr. on post RI basis. 

Conclusion / Investment Strategy

This company is promoted by DMIPL (Munjal Showa fame). SAL has been reporting losses for the last two and half years and based on this, its asking price is on the higher side. It is poised for bright prospects with its diversification plans afoot. Investors may consider parking of funds for long term.

Review By Dilip Davda on December 30, 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 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, 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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

More Shivam Autotech Limited RI Views / Analysis / Recommendations ...

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