Asian Petro RI review (Avoid)

• The company is engaged in the trading of ethylene oxide based derivatives and plastic related products.
• It posted irregular trades with inconsistency in its top and bottom lines.
• It has reported loss for most part of its financial periods.
• It is operating in a highly competitive and fragmented segment.
• There is no harm in skipping this at par RI.

ABOUT COMPANY:
Asian Petroproducts & Exports Ltd. (APEL) has a long-standing history of trading of Ethylene Oxide (EO) based derivatives since inception in 1993 till 2010. Post-2010, the Company diversified into packaging the products traded by it in plastic-related products such as LDPE and HDPE plastic bags, complying with government regulations. Additionally, it expanded trading operations to include a variety of products such as Rubber Processed Oil (RPO), Furnace Oil, Petrochemicals, Solar products, LDPE/HDPE granules, and various allied products.

The Company has successfully sustained its business operations, even as many of competitors have ceased to exist. This resilience is largely due to its strategic diversification of the product range it trades. Ensuring customer satisfaction, fostering loyalty, and actively seeking feedback are integral aspects of its strategy. In addition to trading of Ethylene Oxide (EO) based derivatives, it also packages the products traded by it in LDPE and HDPE plastic bags in its manufacturing unit based on the requirement of customers and in accordance with the government norms. APEL's packaging services provide customers with an added advantage of safe delivery of products and storage in their warehouses in a safe and compliant manner. As of June 30, 2024, it had 7 employees on its payroll.

ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 15890416 equity shares of Rs. 10 each at a fixed price of Rs. 10 per share to mobilize Rs. 15.89 cr. The RI opens for subscription on November 11, 2024, and will close on November 25, 2024. The company is offering RI in the ratio of 11 for 6 to its eligible stakeholders as of the record date of October 30, 2024. However, the offer document first page indicates the overall size of RI at Rs. 16.00 cr., and the said mistake is also appearing on page no. 51 of the offer document in Capital Structure table.

The full amount is to be paid on application for number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.35 cr. for this RI process, and from the net proceeds, it will utilize Rs. 10.00 cr. for working capital, Rs. 5.14 cr. for repayment of unsecured loans from promoters, and Rs. 0.40 cr. for general corporate purposes.

The issue is self-managed by the company itself, and Adroit Corporate Service Pvt. Ltd. is the registrar to the issue.

Post-RI, company's current paid-up equity capital of Rs. 8.67 cr. will stand enhanced to Rs. 24.56 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 24.56 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, it has posted a total income/net profit of Rs. 0.55 cr. / Rs. - (0.30) cr. (FY22), Rs. 16.94 cr. / Rs. 0.11 cr. (FY23), Rs. NIL cr. / Rs. - (1.04) cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it posted loss of Rs. - (0.26) cr. on a total income of Rs. 0.001 cr. Thus it has inconsistent record of top and bottom lines.

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

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 524434 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 24.73 on October 29, 2024, and opened on an ex-right basis at Rs. 14.45 on October 30, 2024. Since then, it has marked high/low of Rs. 20.52/ Rs. 14.31. The scrip last closed at Rs. 20.52 as of November 08, 2024. For the last 52 weeks' it has posted a high/low of Rs. 20.52 / Rs. 7.38. The counter is currently under GSM: Stage 0 /ASM LT: stage 1.

The promoters' holding has been constant at 56.17% for the last three quarters ended September 30, 2024. The counter is well managed by vested interests above RI pricing. Based on its market price movements, the RI appears lucratively priced. But considering its financial track record, it's a "High Risk/Low Return" bet.

Conclusion / Investment Strategy

The company is in the business of trading in ethylene oxide based derivatives and other plastic related products. It marked inconsistency in its top and bottom lines with irregular activities. Though the RI is at par and at a lucrative price considering current manipulated market price, it is a “High Risk/Low Return” bet. There is no harm in skipping it.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on November 9, 2024

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

The Asian Petroproducts & Exports Rights Issue 2024 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Asian Petroproducts & Exports Rights Issue 2024 worth investing. The Asian Petroproducts & Exports Rights Issue 2024 Note sets the Rights Issue expectations in systematic way which tells you if Asian Petroproducts & Exports Rights Issue 2024 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Asian Petroproducts & Exports Rights Issue 2024 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.

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Asian Petro RI review (Avoid)

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