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LIKELY PRICE BAND AROUND RS 40.
The Ahmadabad based laminated sheets manufacturer, Rushil Decor Limited (RDL), is entering the capital market with an IPO. The company, promoted by Mr. Ghanshyambhai Thakkar in 1993, merged other group companies namely Mica Rushil Private Limited and Rushil High Pressure Laminates Private Limited, which were in the same line of business, in 2005.
RDL has an installed capacity of 30 lakh sheets per annum as on date. The company has state-of-art manufacturing facilities with a network of branches, distributors and dealers across India.
OBJECTS OF THE IPO:
RDL is setting up a MDF unit with an installed capacity of 90,000 cu m at Chikmagalur, Karnataka. The total cost of the project is Rs. 67.28 crores which is proposed to be financed through rupee term loan of Rs. 14 crores, External Commercial Borrowing of Rs.30 crores and IPO proceeds of Rs. 23.28 crores. The debt for this project has already been tied up.
MATTERS OF CONCERN:
- IPO grade 2 by ICRA.
- The company has negative cash flow, in the last 5 years.
- The object clause of the company permits the promoter group companies to under take businesses similar to RDL, which will cause conflict of interest.
- Company faces stiff competition from organized players.
- There is audit qualification on maintenance of work in process.
- High working capital intensive unit.
7. Phenol, Methanol and Melamine, are some of the raw material used by the company, which are petrol based products, any variation in price may affect profitability.
VALUATION AND RECOMMENDATIONS:
For FY10 the company earned a PAT of Rs 3.51cr, on the total revenue of Rs 99.80cr. The EPS for the year comes to Rs 4.00. The company will have a post issue capital of Rs 14.40cr. The project is likely to be completed in Oct 2011. The full impact of sales and profitability of the expansion can be seen only in FY13. Because of availment of loans for the expansion, the company’s debt gearing is high at 2.73 times its net worth.
There is execution risk, going by the company’s limited track record in that segment and the size of the expansion relative to company’s current scale of operations.
In view of the above investors advised to stay away from the IPO. One can take a call on the stock post listing.
ISSUE DETAILS:
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ISSUE OPEN / CLOSE
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20-06-11 / 23-06-11
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ISSUE SIZE / PRICE BAND
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56,43,750 EQUITY SHARES.
AROUND RS 40.
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BRLM
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CORP STRATEGIC ALLIANZ, IND MERCHANT BANKING
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REGISTRAR
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BIG SHARE
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IPO GRADE
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2 BY ICRA
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LISTING
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BSE / NSE
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PROMOTERS
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GHANSHYAMBHAI AMBALAL THAKKAR. KRUPESH GHANSHYAMBHAI THAKKAR,
KRUPA KRUPESH THAKKAR, RUSHIL INTERNATIONAL, GHANSHYAMBHAI A. THAKKAR (HUF) AND KRUPESH THAKKAR (HUF
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