Texmaco Rail RI review - (May apply)

•    TREL is a diversified engineering company with big customers like railways.
•    It suffered a setback for the last two fiscals in line with general trends and pandemic.
•    The company is back on track as indicated by its Q1 FY22 performance.
•    Investors may consider investing with a long term perspective.

ABOUT COMPANY:
Texmaco Rail & Engineering Ltd. (TREL) is a part of the Adventz Group of companies, which is engaged in various sectors such as agri business, engineering, infrastructure, real estate, consumer durables and services sectors. It is one of the few private sector companies engaged in signalling, rail telecommunication, track constructions, and a leading player in the field of ballastless tracks for metro rail EPC. TREL is a diversified heavy engineering company, with products including railway freight wagons, hydro-mechanical equipment and industrial structures for the infrastructure industry, locomotive components and locomotive shells, railway bridges, steel castings, and pressure vessels, etc.

The company also executes EPC contracts for the execution of railway track, signalling and telecommunication projects on a turnkey basis. It became operational on April 1, 2010, post the demerger of the heavy engineering and steel foundry division of Texmaco Limited, a company founded in 1939. Texmaco Limited was set up as a textile machinery manufacturing unit and subsequently diversified into other engineering fields including wagon manufacturing, hydro-mechanical equipment, steel castings, providing services to core sectors and process industries in India and abroad.

TREL's major operating divisions presently are: (i) the heavy engineering division comprising of the manufacture and supply of wagons, hydro-mechanical equipment, and bridges and steel structures; (ii) the steel foundry division, and (iii) rail engineering procurement construction ("EPC") division. In addition, as a part of its heavy engineering division, the company has set up a production facility comprising of the traction and coaching division to manufacture EMU, DEMU, MEMU coaches, passenger coaches, locomotive shells, locomotive components and assemblies. Of the aforesaid, it has manufactured ACEMU, locomotive shells, locomotive components and assemblies. Presently, it has six manufacturing facilities at six locations in Agarpara, Belgharia, Sodepur and Panihati located at the outskirts of Kolkata, West Bengal and Urla located in Chhattisgarh.

The company has also expanded its market overseas and have exported wagons and rolling stock to various countries. It has exported Phosphoric acid stainless steel wagons to Senegal, covered wagons with sliding doors and dreadnought end to Uganda, under execution tank and container flat wagons to countries such as Mali in Africa and Sri Lanka, and tank wagons to Bangladesh, Cameroon and Sri Lanka.

ISSUE DETAILS:
The company is coming out with a rights issue (RI) of 71526643 equity shares in the ratio of 2 shares for every 7 shares held as on the record date of October 22, 2021. It has fixed a price of Rs. 23 per share of Re. 1 face value and mulls mobilizing Rs. 164.51 cr. The issue opens for subscription on November 01, 2021, and will close on November 15, 2021. Post allotment, shares will be listed on BSE and NSE. TREL will be spending Rs. 3.22 cr. for this RI process. Funds mobilized from this RI will be used for part repayments/prepayment of ICD and unsecured loans (Rs. 115.00 cr.), working capital (Rs. 30.00 cr.) and general corporate purpose (Rs. 16.29 cr.).

The issue is jointly lead managed by ICICI Securities Ltd. and SKP Securities Ltd. while KFin Technologies Pvt. Ltd. is the registrar to the issue.  

Post RI issue TREL's current paid-up equity capital of Rs. 25.03 cr. will stand enhanced to Rs. 32.19 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 740.30 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, TREL has (on a consolidated basis) posted turnover/net profits of Rs. 1852.53 cr./ Rs. - (69.14) cr. (FY20) and Rs. 1713.87 CR. / Rs. 3.61 cr. (FY21). For the first three months of FY22 ended on June 30, 2021, it has earned a net profit of Rs. 4.63 cr. on a turnover of Rs. 335.74 cr. with recovery in the economy post-un-lockdown initiatives. It has suffered a setback for these periods on account of pandemic and general trends in the segments.  

If we annualize FY22 earnings and attribute it on fully diluted post RI equity capital, then the asking price is at a P/E of around 39.65 making it a fully priced offer. 

SCRIP PERFORMANCE: (This information is based on BSE website data for scrip code 533326)
TREL last closed on cum-right basis at Rs. 39.30 on 20.10.21 and opened ex-right basis at Rs. 36.30 on 21.10.21. Since then it has marked high/low of Rs. 36.30 /Rs. 31.80. The scrip has seen the last 52 weeks high/low of Rs. 38.00 / Rs. 20.57. The scrip last closed at Rs. 32.10 (29.10.21) and based on it TREL's market cap stands at Rs.1033.20 cr. Promoter's holding as of September 30, 2021, is 56.55%.