Thambbi Modern RI review (Avoid)

Thambbi Modern Spinning Mills Ltd. Logo

•    Thambbi Modern is in leasing and construction activities. 
•    It has no stake in the textile business as indicated in its name. 
•    It has been posting losses for the reported periods of the offer document.
•    It has a negative net worth as of September 30, 2022. 
•    There is no harm in skipping this at par RI. 
Thambbi Modern Spinning Mills Ltd. (TMSML) was originally engaged in the business of spinning and weaving different types of fibers and yarns. It also involves in the trading of cotton and yarns. However, the textile manufacturing activity was closed in the year March 2014, and lease out its buildings to earn rental income. 

The company went public in the year 1994 with its maiden IPO of Rs.7.25 cr. and issued 1450000 equity shares of Rs. 10 each at a fixed price of Rs. 50 per share. 

Since 2014, it is in the leasing out of Existing building and doing the construction as per the requirement, primarily based out of and operating in Salem City, Tamilnadu specifically in the outer area of the City. As of September 30, 2022, it has 17 employees on its payroll. 

The company is coming out with a Rights Issue (RI) of 5762770 equity shares of Rs. 10 each at par value to mobilize Rs. 5.76 cr. It is offering RI in the ratio of 1 for 1 to eligible shareholders whose names were registered on the record date of December 16, 2022. The issue opens for subscription on December 29, 2022, and will close on January 12, 2023. The full amount is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.39 cr. for this RI process. From the residual proceeds, it will use for repayment/prepayment of unsecured loans (Rs. 4.32 cr.), and general corporate purposes (Rs. 1.05 cr.). 

The issue is self-managed by the company and Cameo Corporate Services Ltd. is the registrar of the issue.

Post RI, TMSML's current paid-up equity capital of Rs. 5.76 cr. will stand enhanced to Rs. 11.53 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 11.53 cr.

On the financial performance front, the company has been posting losses for the reported periods of the offer document. For the last three fiscals, it has posted a total income/net profit (loss) of Rs. 1.93 cr. / Rs. - (2.18) cr. (FY20), Rs. 2.48 cr. / Rs. - (1.65) cr. (FY21), and Rs. 2.23 cr. / Rs. - (5.10) cr. (FY22). For the first half of FY23 ended on September 30, 2022, it marked a loss of Rs. - (0.66) cr. on a total income of Rs. 1.48 cr. As of September 30, 2022, its current paid-up equity capital of Rs. 5.76 cr. is having negative reserves of Rs. 15.87 cr.

The company has not paid any dividends since its incorporation. It will adopt a prudent dividend policy post-listing of RI based on its financial performance and future prospects. 

The scrip last closed at Rs. 18.00 on December 15, 2022, as cum-right and opened at Rs. 14.00 as ex-right on December 19, 2022. Since then it has marked a high/low of Rs. 14.00 / Rs. 12.70 till this date of the review. It last closed at Rs. 12.70 as of December 27, 2022, and has marked the last 52 weeks' high/low of Rs. 14.00 / Rs. 6.02. The promoter's holding has been at 74.97% for the last three quarters. The counter is well managed around and above RI pricing with thin volumes to lure investors. It is trading at a negative P/E and has accumulated losses.

Conclusion / Investment Strategy

TMSML is engaged in leasing and constructing of properties but has no stake in the textile business as appears in its name. It has been incurring losses and has a negative net worth. Currently, the counter is under GSM – Stage 4. Around 75% promoter’s holding is the only attraction. There is no harm in skipping this at par RI considering the negativity in its performances so far.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Dec 26, 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 Thambbi Modern Spinning Mills Ltd. RI Views / Analysis / Recommendations ...

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


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