Tirupati Tyres RI BSE - issue review - (Avoid)

•    The company is engaged in the business of manufacturing/trading and dealing in rubber products mainly for automobile segment.
•    It posted minuscule financial performance for the reported periods.
•    Post-RI, triple equity base may pose its servicing issues going forward.
•    The company is operating in a highly competitive and fragmented segment.
•    Though at par, this RI is a “High Risk/Low Return” bet and can be skipped.

PREFACE:
The company is floating its RI on April 25, 2025 while its offer document is dated April 16, 2025 and were made available on the designated exchange website only by late eve of April 23, 2025. Off late we are witnessing such time of deliberations for RI process on many occasions. Is it a sound practice?? It is highly surprising that the company is bringing this RI with financial performance only up to September 30, 2024.

ABOUT COMPANY:
Tirupati Tyres Ltd. (TTL) is engaged in the manufacturing, dealing and trading of rubber products mainly for automobile segments i.e., Tubes/Tyres for variety of vehicles like Bicycles, tricycles, mopeds, scooters, motorcycles, auto rickshaws, tractors, trucks, busses, cart moving and self-moving vehicles, etc. It is also engaged in the recycling of byproducts, waste etc.

As of March 31, 2024, it had just 8 employees on its payroll.

ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 48887000 equity shares of Rs. 10 each at par to mobilize Rs. 48.89 cr. The RI opens for subscription on April 25, 2025, and will close on May 05, 2025. The company is offering RI in the ratio of 2 for 1 to its eligible stakeholders as of the record date of April 17, 2025.The company is asking for full payment on application for the number of shares applied. Post allotment, shares will be listed on BSE and MSEI. The company is spending Rs. 0.75 cr. for this RI process, and from the net proceeds, it will utilize Rs. 37.75 cr. for working capital, and Rs. 10.39 cr. for general corporate purposes.

The RI is self-managed by the company and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. 

Post-RI, company’s current paid-up equity capital of Rs. 24.44 cr. will stand enhanced to Rs. 73.33 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 73.33 cr.  However, there is an error on page no.30 of the offer document as it shows post-RI equity capital of Rs. 48.89 cr., which is the overall RI size. The same mistake is repeated on page no. 36 of the offer document in capital structure table.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit/ - (loss) of Rs. 0.29 cr. / Rs. 0.22 cr. (FY23), Rs. 0.41 cr. / Rs. 0.09 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it posted a net profit of Rs. 0.16 cr. on a total income of Rs. 0.45 cr. Thus, it posted minuscule financial performance for recent years. Triple size of post-RI equity base may pose its servicing issues going forward. 

The company operates in a highly competitive and fragmented segment. It marked minuscule financial performance so far and triple equity base post-RI indicates its servicing related issues going forward. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. The offer document is silent on its dividend policy.

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 539040 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 9.42 on April 16, 2025, and opened on an ex-right basis at Rs. 9.60 on April 17, 2025. Since then, it has marked a high/low of Rs. 11.65 / Rs. 9.60. The scrip last closed at Rs. 11.65 as of April 24, 2025. For the last 52 weeks’ it has posted a high/low of Rs. 71.49 / Rs. 8.36. The counter is currently under ESM: Stage 1. This is perhaps the best example of vested interest operated counter.

The promoters’ holding has been constant at 00% for the last three quarters ended with March 31, 2025. The counter is well managed above the par value to tempt investors.