Minda Industries Rights Issue Opens: Should Investors Subscribe To The Offer?

Minda Industries, an auto ancillary company's maiden rights issue of equity shares opened today i.e. August 25. Equirus Capital and Axis Capital are lead managers to the issue, while the registrar is Link Intime India.

Below are detailed key things to know about the rights issue of Minda Industries:

1. Issue details:

The rights issue opens today and the last day for submission of application is September 8, 2020. Rights Entitlements (RE) will be credited to eligible investors by August 24 and the trading in RE will commence from August 25. After applying for rights equity shares of Minda Industries, rights shares will be credited to investors account by September 18 and thereafter it will be combined with fully paid up shares and trading shall begin around September 22.

As part of the issue, 97,11,739 fully paid equity share of face value of Rs 2 each are proposed to be issued as rights shares. Considering full subscription to the issue, outstanding shares would be 27,19,28,704 equity shares.

2. Issue Price and payment terms:

Issue price for the rights issue has been fixed at Rs. 250 per share, which is at a 26.8% discount in comparison to August 21st closing of Rs. 341.5 per share. On applying for the rights issue shares, investors will have to make full payment upfront.

3. Rights Entitlement Ratio:

Eligible investors of the company holding 27 equity shares as on the record date that was August 17 shall be entitled to get 1 fully paid up share.

4. Market Renunciation Date:

Last date for on market renunciation would be September 3, 2020. Renunciation implies where an eligible shareholder denies subscribing to the rights issue and instead let it lapse. Also, there is a provision wherein the eligible investor in the company can renounce the rights shares in favour of some other person and not let it lapse.

5. Issue objective:

The proceeds from the rights issue which are expected to be of the scale of Rs 242,79,34,750 are to be put for repayment and/or prepayment of some or all of the principal or interest of some of the company's debt, investment in JV Toyoda Gosei Minda India, and other corporate purposes.

6. Financials:
For the FY 2020, the company posted 45.7% decline in profit at Rs. 154.95 crore as against Rs. 285.62 crore in the previous fiscal year. Also revenue from operations declined y-o-y by 7.5% to Rs. 5,465.14 crore. For the just ended June quarter of FY21, the company reported loss at Rs. 119 crore versus profit of Rs. 56 crore during the same period last year (Q1FY20). Also, the revenue posted a sharp fall by 71% y-o-y to Rs. 417 crore amid the pandemic crisis.

7. Participation of promoters in the issue:

As of now promoter holding in the firm is at 70.79% while the remaining is held by public. And in the rights issue promoter Nirmal Kumar Minda as well as members of promoter group have agreed to (i) subscribe to the full extent of their Rights Entitlements; (ii) not renounce their Rights Entitlements (except to the extent of Rights Entitlements renounced by any of them in favour of any other member(s) of the promoter and promoter group); (iii) subscribe to rights equity shares for the Rights Entitlements, if any, which are renounced in their favour by any other member(s) of the promoter and promoter group; and (iv) subscribe to additional Rights Equity Shares and to any unsubscribed portion in this issue, subject to compliance with the minimum public shareholding requirements.

8. Should Eligible Investors In Minda Industries Subscribe To Rights Issue?

Given the attractive pricing of the issue which is at a steep 27% discount to its closing price of Rs. 341.5 per share on August 21, experts suggest investors to participate in the issue. Further as per experts the company's aim to pare debt via the rights issue offer is a good indicator in current situation. Minda shares an established position in the auto-components market and is a flagship company of UNO Minda Group, a leading supplier of proprietary automotive solutions to OEMs as Tier-1.

"We are very optimistic over the right issue as the rationale for raising funds is to lower down its debt levels which is Rs 1,180 crore (gross debt) at end FY20 and improve credit rating to bring down interest rate on borrowings, which is an investors friendly approach and need of the hour for business which Minda is into," Prashanth Tapse, AVP Research at Mehta Equities added.

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