Vardhman Poly RI review - (Avoid)

•    The company is in the business of manufacturing cotton and blended yarns. 
•    The company marked de-growth since FY24 with huge losses. 
•    Based on its financial data, the RI relatively appears aggressively priced. 
•    There is no harm in skipping this pricey bet. 

ABOUT COMPANY:
Vardhman Polytex Ltd. (VPL) was originally incorporated as Punjab Mohta Polytex Ltd. and subsequently changed its name to current one. It is currently engaged in the manufacturing of cotton and blended yarn. It has production facilities located in Ludhiana and Nalagarh in India. The Company's principal activity is manufacturing of yarn & garments. Its product range includes yarns, and garments. 

It generates the majority of the revenue from the Textile Business. The Company diverse yarn portfolio spans Cotton (, Combed, Organic, BCI), Cotton-Polyester blends and Value-Added Yarn (Grey) across various counts by employing the finest raw materials, each thread adheres to the global standards, showcasing its commitment to excellence in yarn manufacturing.

As of March 31, 2024, it had 974 employees on its payroll and 72 temporary/retainers engaged in various department. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 83059434 equity shares of Re. 1 each at a fixed price of Rs. 6 per share to mobilize Rs. 49.84 cr. The RI has already opened for subscription on September 12, 2024, and will close on September 27, 2024. The company is offering RI in the ratio of 7 for 23 to its eligible stakeholders as of the record date of August 28, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 0.80 cr. for this RI process and from the net proceeds, it will utilize Rs. 25.00 cr. for repayment of debt, Rs. 12.20 cr. for modernization of plant, and Rs. 11.84 cr. for general corporate purposes.

The issue is solely lead managed by Arihant Capital Markets Ltd., and Alankit Assignments Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 27.29 cr. will stand enhanced to Rs. 35.60 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 213.58 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total revenue/net profit/ - (loss) of Rs. 621.67 cr. / Rs. 1.49 cr. (FY23), Rs. 399.61 cr. / Rs. - (26.76) cr. (FY24). It marked huge loss for FY24 with major decline in its top line. 

As per BSE filing, the company has posted a net loss of Rs. - (10.75) cr. on a total income of Rs. 69.07 cr. for Q1 of FY25 ended on June 30, 2024.

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. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 514175 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 12.13 on August 27, 2024, and opened on an ex-right basis at Rs. 10.70 on August 28, 2024. Since then, it has marked a high/low of Rs. 13.62 / Rs. 10.51.
The scrip last closed at Rs. 11.60 as of September 11, 2024. For the last 52 weeks' it has posted a high/low of Rs. 13.62 / Rs. 4.22. The counter is currently under ESM: Stage 1.

The promoters' holding has been constant at 49.14% for the last three quarters ended on June 30, 2024. The counter is well managed above the RI price to lure investors.