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Shree Rama Multi RI review (May apply)

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•    SRML is engaged in providing primary packaging solutions to the FMCG segment.
•    It has posted inconsistent top and bottom lines for the reported periods.
•    For FY23 it has posted improved performance. 
•    Well-informed/cash surplus investors may park funds for long-term rewards.

Shree Rama Multi-Tech Ltd. (SRML) is an ISO 9001:2015, ISO 15378:2017 and DMF-type III certified Company engaged in providing primary packaging solutions. It currently manufactures a wide and diverse range of packaging products such as laminated tubes ("Lami Tubes"), tube laminates and flexible laminates. Its products are primarily used for oral care, pharmaceuticals, cosmetics and fast-moving consumer goods (FMCG) sectors. 

SRML's products are available in different sizes, diameters and circular shapes as per the specifications of customers. Its manufacturing facility is located in Moti Bhoyan, Dist. Gandhinagar, Gujarat and has installed capacity to manufacture Lami Tubes of 9,574 Lakhs Nos. per annum and laminates (tube & flexible) of 15,000 metric tons per annum. Its manufacturing facility is a fully integrated facility with processes starting from plastic granules to films, laminates, printing, injection moulding and Lami Tube, as required, equipping it to manage products from the stages of design to dispatch. This fully integrated environment and well-defined processes provide it with competitive advantages in terms of maintenance of quality. 

It sells products to customers situated in India as well as overseas. Its customer base is spread across various markets which include Belarus, Bulgaria, Indonesia, Nepal, Saudi Arabia, Singapore, Switzerland, Shri Lanka, Slovenia, Tanzania, Tunisia, UAE, USA etc. SRML's customers majorly consist of medium and large-scale manufacturers of oral care, pharmaceuticals, cosmetics and FMCG products. During the nine months ended December 31, 2022, Fiscal 2022 and Fiscal 2021 its exports were 26.99%, 20.23%, and 26.08% of its total revenue respectively. As of March 31, 2023, it had 350 employees on its payroll and employ additional contract labours as and when required. 

The company is coming out with a Rights Issue (RI) of 70000000 equity shares of Rs. 5 each at a fixed price of Rs. 9 per share to mobilize Rs. 63.00 cr. The issue opens for subscription on June 12, 2023, and will close on June 26, 2023. The full amount is to be paid along with the application for the number of shares applied. It is offering RI in the ratio of 11 shares for 10 shares held as of the record date of May 30, 2023, to the eligible stakeholders. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 1.08 cr. for this RI process and from the net proceeds, it will utilize Rs. 61.72 cr. for repayment of certain borrowings, and Rs. 0.20 cr. for general corporate purposes. 

Vivro Financial Services Pvt. Ltd. is the sole lead manager and KFin Technologies Ltd. is the registrar of the issue. 

Post-RI, SRML's current paid-up equity capital of Rs. 31.73 cr. will stand enhanced to Rs. 66.73 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 120.12 cr. 

On the financial performance front, SRML has posted a turnover/net profit -(loss) of Rs. 136.00 cr. / Rs. 3.43 cr. (FY21), Rs. 150.74 cr. / Rs. - (4.92) cr. (FY22).
For 9M of FY 23 ended on December 31, 2022, it earned a net profit of Rs. 1.26 cr. on a turnover of Rs. 149.24 cr. 

As per the exchange filing, it has posted a turnover of Rs. 196.26 cr. with a net profit of Rs. 5.04 cr. (on an unaudited basis) for FY23. 

The company last paid a dividend for FY2001 and thereafter it skipped. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 11.80 on May 29, 2023, and opened on an ex-right basis at Rs. 11.51 on May 30, 2023. Since then, it has marked a high/low of Rs. 11.55 / Rs. 9.87. The scrip last closed at Rs. 10.91 as of June 09, 2023. For the last 52 weeks, it has posted a high/low of Rs. 15.94 / Rs. 7.27. The promoters' holding has been constant at 42.51% for the last three quarters ended on March 31, 2023. The counter is well managed above the RI value to lure investors.

Conclusion / Investment Strategy

The company has fared poorly in the reported periods till FY22. For FY23 it has turned the corner and indicated improved prospects. Its market price has been well maintained over and around RI price to lure investors. Well-informed/cash surplus investors may park funds for long-term rewards.

Review By Dilip Davda on June 10, 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 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 Shree Rama Multi-Tech Limited RI Views / Analysis / Recommendations ...

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