Thambbi Modern RI review - (Avoid)

•    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. 
 
ABOUT COMPANY:
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. 

ISSUE DETAILS:
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.

FINANCIAL PERFORMANCE:
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.

DIVIDEND POLICY:
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. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 514484 (FV Rs. 10).
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.