UPL Ltd. RI review - (May apply)

 •    It is the fifth largest agro chemical solution provider company globally.
•    The company marked losses from FY24 onwards on account of accounting adjustments on impairment of trade receivables and exchange differences. 
•    The RI is attractively priced at a discount of around 36.65% based on its last traded price.
•    The counter is fancied by investors across the board.
•    Well-informed investors may park funds for long term.

ABOUT COMPANY:
UPL Ltd. (UPL) is one of the leading companies in the agricultural solutions sector, with global operations, offering an integrated portfolio of innovative agriculture solutions through products and services across the crop lifecycle. It is the fifth largest agrochemical company globally in terms of sales. (Source: Agbio Reports). Its product portfolio includes products, such as fungicides, herbicides, insecticides, bio-solutions, seeds, post-harvest solutions, soil and water technology and agronomic services for farmers, as well as physical and digital services. Since Uniphos Enterprises Limited's incorporation in 1969 and the Company's incorporation in 1985, it has forward integrated from the production of phosphorus to currently being present across the agri-value chain. 

It has expanded beyond crop protection to seeds, post-harvest solutions and animal health products, such as honeybee protective miticides and veterinary vaccines, among others. The company promotes the development of sustainable food systems through range of solutions to help farmers improve their yields and create value for farmers throughout the lifecycle of their crops and reduce production costs. It is innovation driven, with R&D and manufacturing centres that are interconnected across a global network, located at strategic locations, enabling it to develop and deliver solutions on a global scale in a cost-efficient manner.

As of September 30, 2024, it had 43 manufacturing facilities, 57 R&D centres across the globe for crop protection, non-agro and seeds segments. Its business is primarily divided into three business segments, namely: Crop protection, Seeds, and Non-agro. As of September 30, 2024, it had 12,354 permanent employees across the globe, including 6,449 permanent employees in India and 5,660 contract labourers in India.

ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 93825955 equity shares of Rs. 2 each at a fixed price of Rs. 360 per share to mobilize Rs. 3377.74 cr. The RI is opening for subscription on December 05, 2024, and will close on December 17, 2024. The company is offering RI in the ratio of 1 for 8 to its eligible stakeholders as of the record date of November 26, 2024. The company is asking for 25% payment (i.e. Rs. 90 per share) on application and the rest (Rs. 270 per share) by one or more calls from time to time as decided by it. Post allotment, RIs will be listed on BSE and NSE. The company is spending Rs. 31.16 cr. for this RI process and from the net proceeds, it will utilize Rs. 3008.81 cr. for prepayment/repayment of certain borrowings of its subsidiaries, and Rs. 337.77 cr. for general corporate purposes. 

The issue is jointly lead managed by Axis Capital Ltd., BNP Paribas, J.P. Morgan India Pvt. Ltd., J M Financial Ltd., and Morgan Stanley India Co. Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post RI, its current paid-up equity capital of Rs. 150.12 cr. will stand enhanced to Rs. 168.69 cr. Based on the RI price, the company is looking for a market cap of Rs. 30399.61 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted total income/net profit/ - (loss) of Rs. 46521 cr. / Rs. 4437 cr. (FY22), Rs. 54053 cr. / Rs. 4414 cr. (FY23), Rs. 43581 cr. / Rs. - (1878) cr. (FY24). For H1 of FY25 ended on September 30, 2024 (as per unaudited results), it marked a loss of Rs. - (1112) cr. on a total income of Rs. 20366 cr. The company posted losses from FY24 onwards on account of impairment losses on trade receivables and exchange differences. 

As of September 30, 2024, its trade receivables were Rs. 15719 cr. against Rs. 16354 cr. as of March 31, 2024. 

DIVIDEND POLICY:
The company has been a dividend paying company and paid last final dividend of 50% in September 2024. Before that it paid a dividend of 500% from FY21 to FY23. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 512070 (FV Rs. 2).
The scrip last closed on cum-right basis at Rs. 569.05 on November 25, 2024, and opened on an ex-right basis at Rs. 545.85 on November 26, 2024. Since then, it has marked a high/low of Rs. 572.60 / Rs. 538.50. The scrip last closed at Rs. 568.30 as of December 04, 2024. For the last 52 weeks' it has posted a high/low of Rs. 599.38 / Rs. 429.63. 

The promoters' holding has been constant at 32.52% for the last three quarters ended with Sept. 30, 2024. The counter is well managed above the RI price to lure investors.