Refex Ind Rights Issue (July 2020) Review

Published on Thursday, July 23, 2020 by Dilip Davda

• RIL has diversified activities with major focus on refrigerant gases.
• Issue is priced at around 11% discount to its closing price on 23.07.20.
• Top and Bottom line has shown growth for last two fiscals.
• Investors may invest with a long term perspective.

About Company:

Refex Industries Ltd. (RIL) is engaged in the business of refilling non ozone depleting refrigerant gases popularly known as hydro fluro carbon or HFC's which are used in air-conditioners, refrigerators and refrigerating equipment. RIL forayed into HFC refrigerants, which unlike other refrigerants gases is an eco-friendly gas that does not harm the ozone layer surrounding the earth.

These gases are primarily used as refrigerants, flam blowing agents and aerosol propellants. HFC is a replacement of the Ozone depleting Chlorofluorocarbons (CFCs) which is already banned in India and Hydro Chloro Fluoro Carbons (HCFCs) that are to be banned in a phased manner from 2020 onwards as per the implementation schedule of the Montreal protocol by the developing Countries. Company's plant for refilling of refrigerant gases is located at Thiruporur about 40 kms from Chennai and has set up distribution outlets in the states of Andhra Pradesh, Chhattisgarh and Maharashtra.

The company had also started the business of trading in coal as well as handling and disposal of ash with power plants in Chhattisgarh and Maharashtra. In addition the company is also providing coal crushing and coal yard management services. Besides these, RIL has also entered in to solar power plant and entered into PPA with NTPC. It also provides consultancy services in the area of its operations.

Issue Details:

To part finance its working capital needs (Rs. 23.00 cr., general corpus fund (Rs. 1.27 cr.), RIL is coming out with a rights issue of 5526848 equity share of Rs. 10 each at a fixed price of Rs. 45 per share to mobilize Rs. 24.87 crore. The company is offering 5 shares for every 14 shares held as on 17.06.20. Issue opens for subscription on 27.07.20 and will close on 10.08.20. Post allotment, shares will be listed on BSE and NSE. The company will be spending Rs. 0.60 cr. for the rights issue process. Issue constitutes 26.3 % of the post issue paid up capital of the company.

Rights issue price is at around 11% discount on the basis of its closing price of Rs.50.80 on BSE on 23.07.20.

Issue is solely lead managed by Keynote Financial Services Ltd. and Cameo Corporate Services Ltd. is acting at registrar to the issue. Post issue, RIL's current paid up equity capital of Rs. 15.47 cr. will stand enhanced to Rs. 21.00 cr.

Financial Track Record:

On financial performance front, for the last two fiscals, RIL has reported turnover/net profits of Rs. 462.90 cr. / Rs. 31.63 cr. (FY19) and Rs. 665.54 cr. / Rs. 33.13 cr. (FY20). As on 31.03.20 its NAV stood at Rs. 48.99.

RIL's counter has marked 52 week high/low of Rs. 118/28 and its last cum-right quote was Rs. 51.52 (as on 15.06.20) and ex-right quote was Rs. 49.42 (as on 16.06.20). The last trading price of the scrip is Rs. 50.80 (on 23.07.20). While with the rights issue pricing RIL mulls market cap of Rs. 94.51 cr. its current market cap is Rs. 106.70 cr.

Conclusion:

RIL's business activities depend on higher working capital; to finance the same this issue is being made. Investors may consider investment for long term. (Subscribe for long term).