TCM Ltd RI review (Avoid)

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•    TCM has restarted its operations from 2021 with diverse activities.
•    It has a poor financial track record with losses of 9M in FY22.
•    Issue is highly-priced with a negative P/E.
•    There is no harm in skipping this greedily priced RI.

TCM Ltd. (erstwhile known as Travancore Chemicals & Manufacturing Co. Ltd.) (TCM) is primarily in the business of chemical manufacturing with two units, one at Mettur Dam, Salem District, Tamil Nadu and the other at Tuticorin, Tamil Nadu. It suspended operations at both these units since the year 2008 (for more than 12 years) due to paucity of raw materials and severe financial constraints. The company has now diversified into the area of "Renewable Energy". In the year 2021, and has further diversified into the area of "Sale and manufacture of Auto safety devices like ENSO" and "Sale of Health Care Products and Devices". Currently, it has also diversified into Aquaculture. 

It has incorporated two subsidiaries, namely Ispark Learning Solutions Private Limited and TCM Healthcare Private Limited., to take care of its diversified activities. As of September 30, 2021, the company had 14 full-time employees.

To part finance its funding requirements for repayment of unsecured loans (Rs. 5 cr.), working capital Rs. 3.25 cr.), general corporate purposes (Rs. 1.60 cr.), TCM is coming out with a rights issue (RI) of 4078842 equity shares of Rs. 10 each at a fixed price of Rs. 25 per share to mobilize Rs. 10.20 cr. The company is issuing RI in the ratio of 6 shares for every 5 shares held on the record date as of April 27, 2022. The issue is opening for subscription on May 12, 2022, and will close on May 26, 2022. Full amount is to be paid along with the application by the eligible stakeholders. Post allotment, shares will be listed on BSE. TCM is spending Rs. 0.35 cr. for this RI process. 

This is the second rights issue from TCM since 2003. The issue is managed by the company itself while Cameo Corporate Services Ltd. is the registrar to the issue. 

Post RI, TCM's current paid-up equity capital of Rs. 3.40 cr. will stand enhanced to Rs. 7.48 cr. Based on RI pricing, the company is looking for a market cap of Rs. 18.70 cr. 

On the financial performance front, for the last two fiscals, TCM has (on a consolidated basis) posted a turnover/net profit of Rs. 2.07 cr. / Rs. 0.30 cr. (FY20) and Rs. 5.48 cr. / Rs. 0.12 cr. (FY21). For the nine months of the FY22 ended on December 31, 2021, it has reported a loss of Rs. - (1.49) cr. on a turnover of Rs. 2.57 cr. Thus the company has posted inconsistency in its bottom lines with a big loss in the pre-RI periods.  

Based on its recent performance, the RI is priced with a negative P/E. 

The company has not paid any dividends in the past and may not be in a position to pay them in the near term considering its current status. However, it will adopt a prudent dividend policy post listing of RIs based on its financial performance and future prospects.  

The scrip last closed on cum-right basis at Rs. 80.55 on April 25, 2022, and opened on the ex-rights basis at Rs. 52.75 on April 26, 2022. Since then it has marked high/low of Rs. 58.10 / Rs. 42.90. The scrip last closed at Rs. 46.80 as of May 10, 2022. Based on this quote, its post-RI market cap stands at Rs. 35.00 cr. The scrip has posted the last 52 weeks high/low of Rs. 70.98 / Rs. 29.39. Promoters holding is at 36.80% for last three quarters. The counter is well operated by vested interests around RI timings.

Conclusion / Investment Strategy

The company has restarted its operations recently with varied activities. However, considering the loss of 9M of FY22 and poor financial track records so far, there is no harm in skipping this highly-priced RI with a negative P/E.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 11, 2022

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

More TCM Limited RI Views / Analysis / Recommendations ...

The TCM Limited Rights Issue 2022 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 TCM Limited Rights Issue 2022 worth investing. The TCM Limited Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if TCM Limited Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in TCM Limited Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.