Refex has limited room for appreciation: Experts

Source: Moneycontrol.com

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Refex Refrigerants, a company engaged in the business of refilling non ozone depleting refrigerant gases, or hydrofluorocarbons (HFCs) proposes to enter capital markets with a public issue of 38 lakh equity shares of Rs 10 each at a premium of Rs 55 per share, aggregating Rs 24.70 crore. Ten per cent of the issue, aggregating Rs 2.47 crore is to be allotted to QIBs.

Moneycontrol conducted a poll on market experts to check whether to apply for the public issue or not. Majority experts said apply.

Experts/Company

Poll Result

Experts view

R S Iyer

(KR Choksey)

Don�t Apply

Refex is a good and very small issue, come out with fixed price band. It is expected to list with Rs 14-15 premium but people should avoid the issue as there are numbers of issues available in the market.

Manish Bhatt

(Prabhudas Lilladher)

Apply

Refex looks to be good issue. People can apply for the issue.

SP Tulsian

(Investment Advisor)

Apply

Refex Refrigerants is into business of refilling and selling non-ozone depleting refrigerants gases popularly known as Hydrofluoro Carbons or HFCs which are used in auto air-conditioners, room and commercial A.C., refrigerators and refrigerating equipments. These refrigerants are replacement for CFC�s and HCFC�s which deplete the ozone layer.

The company is now expanding its capacity from 480 TPA to 3,000 TPA with an estimated outlay of Rs 36.15 crore which is financed by term loan of Rs 5.50 crore and equity issue of Rs 30.65 crore including at par promoters contribution of Rs 5.51 crore from promoters. Post issue, promoters stake would be close to 65%.

The future of the HFC gas is very bright, but the company would have competition from local manufacturers. Due to huge infrastructure cost, the margins of the company would always be under pressure. About 80% is the cost of raw material for the company. If trading turnover is removed, the increase in topline in FY 08 won�t be significant. High equity base of Rs.15.20 crores would also be a dampner.

Considering the trading and service nature of business, the issue has very limited room for appreciation.

The issue opens on July 23 and closes on July 26. Post issue, the promoters stake will come down to 75 per cent.

The company proposes to utilise the net proceeds of the issue to part finance its Rs 36.15 crore expansion plan. The company is expanding its installed capacity of cylinders from the present 480 tonnes per annum to 3,000 tonnes per annum. Promoters are contributing Rs 5.95 crore towards the project and the company is raising Rs 5.50 crore though a term loan from Centurion Bank of Punjab, which has also appraised the expansion project.

Refex is in the business of refilling HFC�s which are used in auto air-conditioners, room air-conditioners, refrigerators and refrigerating equipments.

The company�s clients include Hyundai Motors, Godrej and Boyce manufacturing Co Ltd, Blue Star Ltd and Carrier Aircon Ltd.

The company has entered into a technical collaboration with Kaltech Engineering and Refrigerants Pvt Ltd, Singapore. Kaltech shall provide technical backup to Refex for the activities of the company.

Keynote Corporate Services Ltd is the book running lead manager for the issue and Ashika Capital Ltd is the co-lead manager for the issue.

The equity shares are proposed to be listed on the Bombay Stock Exchange, reports.

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