Shree Ajit Pulp RI (BSE) review (Apply)

• SAPPL is engaged in the manufacturing and marketing of variety of Kraft papers.
• It posted declining trends for its top and bottom lines from FY23 onwards, that raise concern.
• RI is priced in an investor friendly gesture with around 65% discount.
• Investors should not miss this lucrative RI, as the sector is fancied by all.

ABOUT COMPANY:
Shree Ajit Pulp and Paper Ltd. (SAPPL) is primarily engaged in the business of manufacturing, marketing and selling of machine glazed Kraft paper- Test liner (single wire) and multi-layer Test liner (triple wire) from waste recycled papers with wide range from 80-330 grams per square meter ("GSM") and varying from 18-35 bursting factor ("BF") in ("Manufacturing Unit - I").

It is also venturing in light weight 40-120 GSM with high tensile performance Kraft paper in ("Manufacturing Unit - II"). Company's products have a variety of applications and are used in industry such as FMCG, textiles, automobiles, e-commerce, pharmaceuticals, perishable, other packaging items for industrial and household purpose, paper bags, etc. The company sells its products in domestic as well as in international markets.

SAPPL's Manufacturing Unit - I and II are located at Survey No. 239, village salvav, 106, 107, 108P and 105P, Morai, Near Morai Railway Crossing, Vapi 396191, Valsad, Gujarat, India with an installed capacity of 1,20,000 MTPA and Plot No. 1 and 1/B, Phase I, GIDC, Vapi - 396195, Gujarat with an installed capacity of 82,500 MTPA, respectively. Manufacturing Unit - II is newly set up and has commenced the commercial production w.e.f. July 17, 2023.

The company has been recognized as a 'One Star Export House' by Ministry of Commerce and Industry, Government of India for its performance in export of products. It is also engaged in the generation of electricity from windmills. It has an aggregate installed capacity of ~1.50 and ~1.25 megawatts (MW) for wind power facilities located at Rajkot and Dwarika which SAPPL uses for captive consumption, which in turn helps it reduce the cost of power. As of November 30, 2023, it had 213 employees on its payroll.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 3571133 equity shares of Rs. 10 each at a fixed price of Rs. 80 per share to mobilize Rs. 28.57 cr. The RI opens for subscription on January 30, 2024, and will close on February 20, 2024. The company is asking Rs. 48 per share on application and the balance by one or more calls from time to time. The company is offering RI in the ratio of 2 for 3 to its eligible stakeholders as of the record date of January 18, 2024. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.45 cr. for this RI process and from the net proceeds, it will utilize Rs. 25.00 cr. for working capital, and Rs. 3.12 cr. for general corporate purposes.

The issue is solely lead managed by Vivro Financial Services Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar of the issue.

Post RI, company's current paid-up equity capital of Rs. 5.36 cr. will stand enhanced to Rs. 8.93 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 71.42 cr.

The company marked de-growth in its RoNW from 11.52% for FY22 to 1.84% for H1 of FY24.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted total income/net profit of Rs. 419.21 cr. / Rs. 21.62 cr. (FY22), and Rs. 372.29 cr. / Rs. 20.70 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it earned net profit of Rs. 3.81 cr. on a total income of Rs. 145.04 cr. It has posted declining trends for the last 18 months' period.

DIVIDEND POLICY:
The company has declared 10% dividend for the last three fiscals. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects.

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 538795 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 419.20 on January 17, 2024, and opened on an ex-right basis at Rs. 255.10 on January 18, 2024. Since then, it has marked a high/low of Rs. 275.00 / Rs. 221.05. The scrip last closed at Rs. 228.80 as of January 25, 2024. For the last 52 weeks' it has posted a high/low of Rs. 297.10 / Rs. 158.86. Thus this RI is attractively priced.

The promoters' holding has been constant at 56.84% for the last three quarters ended with December 31, 2023. The counter is marking trades above RI price and thus this RI is at a hefty discount of around 65% based on its last traded price.

Conclusion / Investment Strategy

The company is a dividend paying and is engaged in fancies Kraft paper production and marketing. No doubt it marked de-growth it its top and bottom lines for the last 18 months’ performance, it will be soon back on track once it has working capital in its hand. RI is lucratively priced with around 65% discount to its last traded price. Investors should not miss this mini bonus like bet.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on January 26, 2024

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 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 ).

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Shree Ajit Pulp and Paper Limited Review by Dilip Davda

The Shree Ajit Pulp and Paper Rights Issue 2024 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 Shree Ajit Pulp and Paper Rights Issue 2024 worth investing. The Shree Ajit Pulp and Paper Rights Issue 2024 Note sets the Rights Issue expectations in systematic way which tells you if Shree Ajit Pulp and Paper Rights Issue 2024 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Shree Ajit Pulp and Paper Rights Issue 2024 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.

Shree Ajit Pulp RI (BSE) review (Apply)

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