Raghav Productivity Enhancers

Annualising the earnings of the last two quarters, the PAT will be Rs 16cr for the full year. Forward PE is still below 50. It seems that the stock price will soon lose all sense of restraint. If forward PE goes above 60-70, most likely I will pare down my holding almost completely once the upper circuits end. Selling will not be difficult since this frothy market has been very forgiving to stock run-ups. However, timing is important. In many cases, once the trend changes, it becomes difficult to get out.


@Malhar_Manek, Can you explain why would promoters give a 20% discounted price (at the time of announcement) over and above a 15% interest to RJ, when there was a clear option for the company to go for a QIP at much attractive price? What was forcing them to go for this 30.9 odd cr? Isn’t it strange?? and for me its a big red flag.

@Malhar_Manek I never said it makes steel. All I said was steel sector. Still the revenues of RPEL are very much dependent on steel companies.

  1. Having marquee investors onboard gives tremendous trust to the company in the stock market
  2. It is highly unlikely that the marquee investors will get large quantities of shares in the open market
  3. Networks and contacts: For example, Shri Rakesh Jhunjhunwala is a big investor in steel companies. He could potentially (no information-pure guess) help have his investee companies like Tata Steel and SAIL (this information is in public domain) as RPEL’s clients

515*600000=30.9 Cr, so I don’t see any problem here

This I agree with.

Could you please elaborate on the red flag? As I am invested and I would like to hear any disconfirming evidence.

Disc: invested

My concern was… why do you think, the promoters have not gone for QIP route for the same number of shares at much higher price (when the RJ announcement was made) instead settled for only Rs.515 and a 15% interest on the top to him? And do you think this was done just to earn the trust in stock market?

I think trust in stock markets is important for any company and having RJ is a huge thing. Consider Nazara (not holding): nearly every headline on the company starts with ‘Rakesh Jhunjhunwala-backed Nazara…’

I do think that there were multiple options for the company if the purpose was to raise capital. It would be easy for them to get a bank loan at a much lower interest rate given their performance and return ratios etc. I think they were focused more on the networks, contacts, trust in markets, mentorship etc. Especially contacts I think plays a huge role- having SAIL or Tata Steel as clients will be huge for RPEL, and I am fairly confident that having RJ as an investor may help in this.

Regarding price of 515, I do agree that issuing shares at discount to CMP is not a great practice (in my opinion)- but is having RJ onboard worth doing that? This is a tradeoff that they had to take. This can be debated but it depends on your opinion. It is important to note that promoter holding too will be diluted significantly:

So promoters too would have been cautious about the price not being too low.

The concern regarding issuing shares at discount to CMP was there even during the preferential allotment at Rs 170 when CMP was 220. But is the large discount worth what these legendary investors bring to the table? I personally think yes.

Disc: invested

I leave it here though I am not convinced on the Trust theory.
It would be interesting to see how RJ would influence SAIL (A Govt. Co) and Tata steel to be a RPEL client.

I find it funny that we are lambasting the management for diluting at Rs 515 when just 6 months ago nobody was complaining that the same management diluted at Rs170. Surely, not even the most optimistic shareholders would have dreamed that the stock would be up 4x in the last 6 months; and supposedly had RJ bought the same quantum of stock 6 months back at Rs 250; everyone would be happy. Is this a case of anchoring bias?

For me, it seems the stock price has long stopped reflecting reality. Part of the reason is the supremely low free float. Promoters own 70%, Another 15% is with long term investors, another ~6-7% is locked with those who got allotted shares in Feb as part of the pref issue. In such a scenario, and with such demand, the stock price has lost all meaning temporarily. I personally take the fact that RJ was willing to buy as a big positive that the company is moving in the right direction; and would probably take his buy price as a benchmark for what the stock is aactually worth.

Disc: Invested


Lets us do some digging about market size of its products, as per company its not more than 1000 crore then Why to give this high value for a crocodile in a little pond? Or the recent marquee investors know more than that?

Yes, Indian market size is limited at Rs 1000cr. However, the company is still below Rs 100cr revenue, so there appears to be room to grow. Really the company is bullish on the exports front, which contributed 25% of the revenue last FY. It seems they have succeeded in marketing their product internationally during the pandemic.


  1. Any idea about the global market size and are there any competitors with potential to disrupt?
  2. If the product improves productivity, the market size can grow. Any idea about this?

The company is also looking at other segments since the last few years unsuccessfully.


@sameernics The dilution is only around 5% which is equivalent to the daily price change in the last few days. So, I don’t think it is a big concern. Minority investors have already benefited much more due to the stock re-rating.

Reasons for offering discount to a big investor can be to build relationship with the investor, so the investor will stay invested with the company for a long time. The investor may also provide further capital in the future. Personally I don’t think such huge discount was needed, but I am not too bothered about it.

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I offloaded almost all of my holding today. There is possibility of further upside although the probability is low. There are other more promising alternatives for the next 12 months. Will consider buying again once the PE reduces significantly to 35-40 due to company performance or price correction.

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RPEL declared Q2 numbers:

Although sales and profits are higher, receivables have increased sharply; this is also why cash flow has been impacted.
CCD proceeds have been kept in liquid FDs and MFs
Depreciation could be higher in Q3 due to increase in gross block

Disc- invested


Recent exchange announcement by RPEL:

Board meeting for appointment of a new director on the board. Will be interesting to see who this is. I won’t be surprised if there is a nominee director for one of the marquee investors.

Disc- invested

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Big update: Appointment of Shri Hemant Nerurkar (Chairman of NCC) as independent director. Also, Mr Rajesh Malhotra has resigned as independent director but not a big surprise given his absenteeism in AGMs and EGMs (mentioned in earlier posts):

(highlights added by me)

NCC shareholding:

Trust Asset Management directors:

Link for exchange announcement: https://www.bseindia.com/xml-data/corpfiling/AttachLive/9c5a78e8-bc54-46e6-93fd-ce14b0ea8313.pdf

Disc- invested

What could be the potential anti-thesis pointers for the company?

Good numbers. Receivables have increased, though broadly in line with increase in revenue

Disc- invested