Raj Oil Mills IPO

Raj IPO: Price Band

Raj Oil IPO has declared that it has a price band between Rs. 100 and Rs.120.

Raj Oil IPO Date

Raj Oil IPO will open on Monday July 20, 2009 and close on Thursday July 23, 2009.

Business of Raj Oil Mills

Raj Oil is in the edible oil business and is engaged in crushing and oil filtration with a capacity of 5,000 TPA and 30,000 TPA. The company was incorporated in 2002, but the business itself has been running since 1959, when it was a partnership. The private company simply bought out the private firm and got access to all its assets and operations.

These are some brands that the company markets its products under:

  • Cocoraj (Coconut Oil)
  • Cocoraj Cool (Ayurvedic Oil)
  • Guinea Groundnut Oil (Double Filtered Oil)
  • Guinea Lite Groundnut Oil (Refined Oil)
  • Guinea Lite Sunflower Oil (Refined Oil)
  • Guinea Lite Cottonseed Oil (Refined Oil)
  • Guinea Lite Soyabean Oil (Refined Oil)
  • Tilraj Til Oil
  • Mustraj Mustard Oil
  • Cocoraj Jasmine

The brands are present in Western India, which is where the company has its major presence. The company plans to raise funds from this IPO to considerably expand its capacity. It currently has a crushing / filtering / refining capacity of 35,000 tons per annum (tpa) and it plans to increase it to 226,500 TPA.

This enhanced capacity will enable Raj Oils to enter the North Indian market by setting up plant in Jaipur, Rajasthan. It will also help it in backward integration, as it plans to enter into crushing of groundnut, mustard, and sesame seeds. It is currently dependent on suppliers for this function.

Raj IPO Grading

ICRA has graded Raj IPO 2 out 5, which means that the IPO has below average fundamentals. The things that weighed down the ratings were small scale of operation and the history of civil and criminal cases against the company. The other factors that weigh down against the rating is that the company is concentrated in the western region of the country and the market in which Raj Oil operates is highly competitive and scaling up involves several challenges.

Financials of Raj Oil Mills

In FY 2008, Raj Oil had a revenue of Rs.32,123.12 lacs, up from Rs.23,992.11 lacs in the year before and Rs.12,021.36 lacs in FY 2006. The Profit after Tax for the last three years has been Rs. 2,961.88 lacs, 1,815.20 lacs and Rs.672.41 lacs.

The EPS for the financial year 2008 was Rs. 11.87 and it was Rs.10.47 the year before and Rs.7.86 the year before that. If you take the EPS for the last year, the P/E multiple ranges from 8.42 to 10.11 for the upper and lower range of the Raj IPO.

Raj Oil IPO: Risk Factors

Here are some key risks as mentioned in the prospectus:

The company faces three criminal cases and one civil case. The company is also involved in legal proceedings with respect to tax demands.

The company has defaulted in terms of loan granted by Barclays PLC. It had taken a loan from Barclays for Rs. 1000 lacs and had to create a charge on its immovable property within 180 days. It didn’t do it and Barclays has asked Raj Oil to repay the outstanding Rs. 4.5 crores in two installments.

The promoters formed the company Raj Oil Mills and then it acquired the partnership firm of the promoters for Rs. 75 lacs. There is no non compete agreement and the promoters may start a similar business and then compete with Raj Oil Mills.

Another venture by the promoters known as M/s. Raj Builders incurred a loss of Rs.459.41 lacs in FY 2009 and Rs. 442.21 lacs in FY 2008.

There has been a negative cash flow from operations for Raj Oil Mills for the year ended December 31st 2008 and as at January 31st 2009.

This is not a buy or sell recommendation on the Raj Oil Mills IPO. This is just a summary of information based on the prospectus it filed with SEBI.