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1 | P A G E

SECTOR: TEXTILES REPORTING DATE: 24TH JANUARY, 2018

RAJ RAYON INDUSTRIES LTD. www.rajrayon.com

Raj Rayon Industries Ltd. NSE Code - RAJRAYON TABLE 1 - MARKET DATA (STANDALONE) (AS ON 23rd JANUARY, 2018)

Sector - Textiles NSE Market Price (`) 0.65 NSE Market Cap. (₹ Cr.) 19.40

Face Value (`) 1.00 Equity (` Cr.) 34.65

Business Group – N.A. 52 weeks High/Low (₹) 0.85/0.10 Net worth (₹ Cr.)* -463.23

Year of Incorporation - 1993 TTM P/E (TTM) N.A. Traded Volume (Shares) 1,32,526

TTM P/BV N.A. Traded Volume (lacs) 0.86

Registered Office - Source - Capitaline, TTM - Trailing Twelve Months, N.A. - Not Applicable, *As on 30th September, 2017

Survey No. 177/1/3, COMPANY BACKGROUND

Village – Surangi, Silvassa, Raj Rayon Industries Limited is engaged in manufacturing textured yarn of polyesters and

polyesters chips. The Company is also engaged in manufacturing of Polyester Texturized

Yarn (PTY), Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY).

The Company's plants are designed to produce a range of specialty yarns, such as Bright

Yarns (Trilobal), Cationic Yarn, Cotluk (Full Dull), Coloured Yarns (Dope Dyed), yarns of

various cross sections, such as Tri-lobal and Octa-lobal, and Fire retardant and Anti-

Microbial Yarns. It offers products in various deniers and filaments, such as POY in Semi

Dull, Full Dull-Cotluk, Cationic Yarns, Dope Dyed and Micro filaments; FDY in Semi Dull, Full

Dull-Cotluk, Cationic, Trilobal Bright and Cationic Bright, and PTY in Semi Dull, Full Dull-

Cotluk, Dope Dyed, Micro Filaments, Non-Intermingle, Low/Slight Intermingle and High

Intermingle. The Company exports its products to South America, Europe, Middle East,

Africa, Far East and South-East Asia.

Dadra & Nagar Haveli - 396 230

Company Website:

www.rajrayon.com

Revenue and Profit Performance

The revenue of the Company decreased from ₹80.86 crores to

₹9.04 crores from quarter ending Sep’16 to quarter ending

Sep’17. The Company made a loss of ₹12.82 crores in quarter

ending Sep’17 vis-a-vis making a loss of ₹10.92 crores in quarter

ending Sep’16.

Source: Moneycontrol

Performance vis-à-vis Market

TABLE 2- Returns

1-m 3-m 6-m 12-m

Raj Rayon

Industries Ltd. 116.67% 61.54% 160.00% 116.67%

Nifty 5.63% 6.86% 10.61% 29.46%

Source - Capitaline/NSE

9.04

52.25

80.86

-12.82

-19.07-10.92

-50

0

50

100

Sep'17 Mar'17 Sep'16

Quarterly revenue and Profit (₹ CRORE)

Revenue Profit

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Jan 17 Mar 17 May 17 Jul 17 Sep 17 Nov 17 Jan 18

Raj Rayon Industries Ltd NIFTY

http://www.rajrayon.com/



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TABLE 3 - FINANCIALS

(₹ Cr.) Sep’17 Mar’17 Sep’16 % Change

Sep ’17 vs Mar’17 Mar’17 vs Sep’16

Net Worth -463.23 -421.99 -383.22 N.A. N.A.

Current Assets 36.61 49.30 75.63 -25.74% -34.81%

Non-Current Assets 273.28 292.54 321.16 -6.58% -8.91%

Total Assets 309.89 341.84 396.79 -9.35% -13.85%

Investments 0.10 0.10 0.10 0.00% 0.00%

Finance Cost 0.00 0.15 0.37 -100.00% -59.46%

Long Term Liabilities 336.67 374.79 639.53 -10.17% -41.40%

Current Liabilities 436.45 389.05 140.48 12.18% 176.94%

Turnover 9.04 52.25 80.85 -82.70% -35.37%

Profit After Tax -12.82 -19.07 -10.92 N.A. N.A.

EPS (₹) -0.37 -0.55 -0.31 N.A. N.A.

Source - Money Control/Stock exchange filing

AUDIT QUALIFICATIONS

Audit Qualifications in last 3 years: The Statutory Auditors have raised qualifications in their Report for the FY 2016-17. No

qualifications were raised for FY 2014-15 and FY 2015-16.

Basis for Qualified Opinion (FY 2016-17): “The attached Balance Sheet as at 31st March 2017 is drawn on the basis of Principle of

‘Going Concern’. We opine as follows in this connection:

a) Due to defaults in payments of Bank loans, the company’s accounts have been classified as Non- Performing Assets (NPA) by

the bankers under Consortium. The banks (except South Indian Bank which has charged Interest for April 2016) have not charged

interest on the company’s borrowings / loans or reversed the interest charged. Therefore, no provision has been made for such

Interest in the books of accounts of the company and to that extent, finance cost and total loss is estimated to be understated by

Rs. 95.02 crores for the year ended 31st March 2017.

b) The Company’s account stands exited from CDR Mechanism. However, in view of classification of Company’s account as Non-

Performing Asset (NPA), contingency related to compensation payable in lieu of bank sacrifice cannot be determined currently.

c) The Net worth of the Company is fully eroded. However, the management has prepared the financial statements on going

concern basis. The appropriateness of the ‘Going Concern’ concept based on which the accounts have been prepared is inter alia

dependent on the Company’s ability to infuse requisite funds for meeting its obligations to lenders / rescheduling of debt and

resuming normal operations.

We further report that, except for the effect, if any, of the matters stated in paragraph (b) and (c) above, whose effect are not

ascertainable, had the observations made under ‘Basis for Qualified opinion considered, the loss after tax for the year ended

March 31, 2017 would have been higher by Rs. 95.02 crores.”

Management Response (FY 2016-17): “The Directors refer to the Auditors’ observation in the Auditors’ Report and provide their

explanation as under:

i) In respect of Note 2 of the Financial Statement regarding amount payable towards recompense: The recompense payable is

contingent on various factors including improved performance of the Company (Borrowers) and many other conditions, the

outcome of which currently is materially uncertain and cannot be determine.

ii) In respect of Auditors observation in Financial Statements regarding cash losses incurred by the Company: It is clarified that

the cash losses were primarily attributable to the lower volumes due to prevailing uncertain economic conditions, lower sales

volume coupled with increase in depreciation and interest/finance cost.

iii) In respect of Auditors observation in Financial Statement regarding Net worth of the company is fully eroded: It is clarified

that management is continuously implementing various long-term measures to improve its cash flows and revival of the

operation of the company and accordingly the companies’ financial statement has been prepared on a going concern basis.”




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Response Comment

Frequency of Qualifications No -

Have the auditors made any adverse remark in last 3 years? No -

Are the material accounts audited by the Principal Auditors? Yes -

Do the financial statements include material unaudited financial statements? No -

TABLE 4: BOARD PROFILE (AS PER ANNUAL REPORT - FY 2016-17)

Regulatory Norms Company

% of Independent Directors on the Board 50% 50%

% of Promoter Directors on the Board - 17%

Number of Women Directors on the Board At least 1 1

Classification of Chairman of the Board - Non-Executive Promoter Director

Is the post of Chairman and MD/CEO held by the same person? - No

Average attendance of Directors in the Board meetings (%) - 80.00%

Composition of Board: As per Regulation 17(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,

2015 "Listing Regulations, 2015", the Company should have at least 50% Independent Directors as the Chairman of the Board is

a Promoter Director. The Company has 50% of Independent Directors and hence, it meets the regulatory requirements.

Board Diversity: The Company has 6 directors out of which one is Woman Director.

TABLE 5 - FINANCIAL RATIOS

Ratios Sep’17 Mar’17 Sep’16

% Change

Sep ’17 vs

Mar’17

Mar’17 vs

Sep’16

Turn

ove

r

Rat

ios

Inventory Turnover 0.75 2.88 2.02 -73.82% 42.68%

Debtors Turnover 0.52 2.49 3.10 -79.30% -19.59%

Fixed asset Turnover 0.03 0.18 0.25 -81.48% -29.05%

Current Asset Turnover 0.25 1.06 1.07 -76.70% -0.86%

Ret

urn

Rat

ios Operating Profit Margin -42.48% -14.60% 0.61% N.A. -2,509.47%

Net Profit Margin -141.81% -36.50% -13.51% N.A. N.A.

Return on Assets (ROA) N.A. N.A. N.A. N.A. N.A.

Return on Equity (ROE) N.A. N.A. N.A. N.A. N.A.

Return on Capital Employed (ROCE) N.A. N.A. N.A. N.A. N.A.

Liq

uid

ity

Rat

ios

Current Ratio 0.08 0.13 0.54 -33.81% -76.46%

Quick Ratio 0.06 0.08 0.25 -29.57% -68.38%

Cash Ratio 0.02 0.03 0.07 -37.95% -61.23%

Working Capital Turnover ratio N.A. N.A. N.A. N.A. N.A.

Solv

ency

Rat

ios Debt to equity ratio N.A. N.A. N.A. N.A. N.A.

Interest Coverage Ratio N.A. N.A. 1.32 N.A. N.A.

Trad

ing

Rat

ios

Market Cap / Sales 1.34 0.13 0.13 911.69% 3.21%

Market Cap/ Net Worth N.A. N.A. N.A. N.A. N.A.

Market Cap/PAT N.A. N.A. N.A. N.A. N.A.

Market Cap/EBITDA N.A. N.A. 21.20 N.A. N.A.

Source - Money Control/Stock exchange filing




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TABLE 6 - TRADING VOLUME

Particulars Dec’17 June’17 Dec’16

% Change

Dec ’17 vs

June’17

June’17 vs

Dec’16

Trading Volume (shares) (avg. of 1 qtr) 2,61,814 47,907 43,515 446.50% 10.09%

Trading Volume (shares) (high in 1 qtr) 37,48,920 12,21,222 4,27,971 206.98% 185.35%

Trading Volume (shares) (low in 1 qtr) 1,002 110 2,000 810.91% -94.50%

Ratio - High/low trading volume 3,741.44 11,102.02 213.99 -66.30% 5,088.21%

Ratio - High/average trading volume 14.32 25.49 9.84 -43.83% 159.19%

Source - Capitaline

TABLE 7 (A): OWNERSHIP & MANAGEMENT RISKS

Dec-17 Jun-17 Dec-16 Comments

Shar

eho

ldin

g (%

)

Promoter shareholding 34.07 34.07 34.07 • No new equity shares issued during the period

from 1st Jan’17 to 31st Dec’17.

• No change in the promoter shareholding during

the said period.

• No change was observed in the shareholding

pattern during the said period.

• The promoters have pledged 100% of their

shareholding.

Public - Institutional

shareholding 0.41 0.41 0.41

Public - Others shareholding 65.52 65.52 65.52

Non-Promoter Non-Public

Shareholding 0.00 0.00 0.00

Source - NSE

MAJOR SHAREHOLDERS (AS ON 31st DECEMBER 2017)

S. No. Promoters Shareholding S. No. Public Shareholders Shareholding

1 Raj Money Market Limited 27.34% 1 Fine Fashion Private Limited 7.59%

2 Rajkumari Kanodia 2.65% 2 Jitendra B Salecha 4.04%

3 Sushil Kumar Kanodia 1.96% 3 Subramanian P 3.52%

4 Akanksha Jatin Mehta 0.52% 4 Sampoodevi Kailashchandra Kanodia 3.02%

5 Radheshyam Kanodia (H.U.F.) 0.49% 5 Ajaykumar Kailashchandra Kanodia 3.02%

Source - NSE

TABLE 7 (B): OWNERSHIP & MANAGEMENT RISKS

Market Activity of Promoters The promoters have not sold/bought any shares in FY 2016-17.

Preferential issue to promoters No preferential issue of shares was made to the promoters in FY 2016-17.

Preferential issue to others No preferential issue of shares was made to other shareholders during FY 2016-17.

GDRs issued by the Company The Company did not issue any GDRs during last FY 2016-17.

Issue of ESOPs The Company did not issue any shares to the employees under its ESOP Scheme in FY2016-17.

Source - Annual Report FY 2016-17

TABLE 8: PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

Sr. No. Name and Description of main products / services % to Total turnover of the Company

1 Textured Yarn of Polyesters & Polyesters Chips 96.25

Source - Annual Report FY 2016-17




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Glossary

Equity: The equity shares capital of the Company

Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholders’ funds of the Company

Turnover: The revenue earned from the operations of the Company

EPS: Earning Per Share is net profit earned by the Company per share

𝐸𝑃𝑆 =Profit After Tax

Number of outstanding shares

P/E ratio: It is the ratio of the Company’s share price to earnings per share of the Company

𝑃/𝐸 𝑟𝑎𝑡𝑖𝑜 =Price of each share

Earnings per share

Current Assets: Cash and other assets that are expected to be converted to cash in one year

Fixed Assets: assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land,

buildings, and equipment

Total Assets: Current Assets + Fixed Assets

Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in

the future.

Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges

incurred during the year in relation to borrowed money.

Long Term Liabilities: Long-term liabilities are liabilities with a maturity period of over one year.

Current Liabilities: A company's debts or obligations that are due within one year.

Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced

over a period.

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Inventory

Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business

can turn its accounts receivable into cash during a period

𝐷𝑒𝑏𝑡𝑜𝑟𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Accounts recievables

Fixed Asset Turnover: The fixed-asset turnover ratio is a financial ratio of net sales to fixed assets

𝐹𝑖𝑥𝑒𝑑 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Fixed Assets

Current Asset Turnover: The current-asset turnover ratio is a financial ratio of net sales to fixed assets

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =Sales Turnover

Current Assets

Operating Profit Margin: Operating margin is a measurement of what proportion of a Company’s revenue is left over after

paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Company’s operating

income (also known as “operating profit”) during a given period by its sales during the same period.

𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =Operating profit

Sales Turnover

Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales

𝑁𝑒𝑡 𝑃𝑟𝑜𝑓𝑖𝑡 𝑀𝑎𝑟𝑔𝑖𝑛 =Net profit

Sales Turnover




6 | P A G E



Return on Assets: ROA tells you what earnings were generated from invested capital (assets)

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐴𝑠𝑠𝑒𝑡𝑠 =Net profit

Total Assets

Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholders’

equity.

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐸𝑞𝑢𝑖𝑡𝑦 =Net profit

Net worth

Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability

and the efficiency with which its capital is employed.

𝑅𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝐸𝑚𝑝𝑙𝑜𝑦𝑒𝑑 =Net profit

Total Debt + Equity share capital

Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts

over the next 12 months. It compares a firm's current assets to its current liabilities.

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =Current Assets

Current Liabilities

Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities.

𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 =Current Assets − Inventories

Current Liabilities

Cash ratio: The ratio of the liquid assets of a Company to its current liabilities.

𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 =Current Assets − Inventories − Account Recievables

Current Liabilities

Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates

a Company's effectiveness in using its working capital.

𝑊𝑜𝑟𝑘𝑖𝑛𝑔 𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =𝑆𝑎𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

Current Assets − Current Liabilities

Debt to Equity ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of

shareholders' equity and debt used to finance a company's assets.

𝐷𝑒𝑏𝑡 𝑡𝑜 𝐸𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 =𝑆ℎ𝑜𝑟𝑡 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡 + 𝐿𝑜𝑛𝑔 𝑇𝑒𝑟𝑚 𝐷𝑒𝑏𝑡

𝑁𝑒𝑡 𝑊𝑜𝑟𝑡ℎ

Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a

Company can pay interest on outstanding debt.

𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝐶𝑜𝑣𝑒𝑟𝑎𝑔𝑒 𝑅𝑎𝑡𝑖𝑜 =𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝐵𝑒𝑓𝑜𝑟𝑒 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑛𝑑 𝑇𝑎𝑥

𝐹𝑖𝑛𝑎𝑛𝑐𝑒 𝐶𝑜𝑠𝑡

Market Cap/Sales ratio: Market Cap/sales ratio, Price–sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is

calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per-

share stock price by the per-share revenue.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑆𝑎𝑙𝑒𝑠 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑆𝑎𝑙𝑒𝑠 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Company’s market cap to net worth.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑁𝑒𝑡𝑤𝑜𝑟𝑡ℎ 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑁𝑒𝑡𝑤𝑜𝑟𝑡ℎ

Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company’s market cap to net profit.

𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝑃𝐴𝑇 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡

Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company’s market cap to EBITDA.


http://www.investopedia.com/terms/i/invested-capital.asp

http://www.investopedia.com/articles/stocks/05/04405.asp

https://en.wikipedia.org/wiki/Stock

https://en.wikipedia.org/wiki/Market_cap

https://en.wikipedia.org/wiki/Stock



7 | P A G E



𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝/𝐸𝐵𝐼𝑇𝐷𝐴 𝑟𝑎𝑡𝑖𝑜 =𝑀𝑎𝑟𝑘𝑒𝑡 𝐶𝑎𝑝

𝐸𝐵𝐼𝑇𝐷𝐴

Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year

Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year

Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year




8 | P A G E



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