Rama Steel hits 10% upper limit as stock turns ex-bonus

Shares of Rama Steel Tubes were locked in a 10% upper circuit on the BSE after they turned ex-bonus today. The company had fixed January 6 as the record date for the purpose of ascertaining the eligibility of shareholders entitled for issuance of bonus shares in the ratio of 4:1, i.e. 4 bonus shares for every 1 share held on the record date.

After falling nearly 6% in the previous session, shares of Rama Steel share price opened higher and gained 10% to hit a 52-week high of ₹38.15 on the BSE. In contrast, the BSE Sensex witnessed a surge in selling activities, falling as much as 576 points, or 0.95%, to 59,777 levels.

With a market capitalisation of ₹1,740 crore, Rama Steel shares have given a solid return of 131% in the past one year, while it has risen 143% in the six month period. In the last one month, the share of pipes manufacturing company has risen 11%. The counter has zoomed 223% in the last ten months, from its 52-week low of ₹11.80 on February 25, 2022.

“The board of directors has fixed January 6, 2023, as the record date, for the purpose of ascertaining the eligibility of shareholders entitled for issuance of bonus shares,” Rama Steel said in a BSE filing on December 27, 2022.

“The bonus shares, once allotted, shall rank pari-passu in all respects with and carry the same rights as the existing equity shares and shall be entitled to participate in full in any dividend and other corporate action, recommended and declared after the new equity shares are allotted,” it had said in the exchange filing.

In a separate development, domestic rating firm ICRA has assigned ‘ICRA BBB’ ratings to Rama Steel Tubes’ ₹165 crore bank facilities with stable outlook. The agency has assigned a long-term rating of [ICRA]BBB- and a short-term rating off [ICRA]A3 to the bank facilities.

“ICRA’s ratings action favourably factors in Rama Steel Tubes’ experienced management and its long track record of operations in the steel pipes industry. The ratings also consider its diversified and strategically located manufacturing facilities, resulting in savings of logistics costs and healthy relationships with key customers, marked by diversified distribution channels,” the agency said in its report released on January 4.

While assigning the ratings, ICRA also takes cognisance of the ongoing capacity expansion plans at an estimated outlay of around ₹130-150 crore over the next three years, which will increase the company’s total capacity by around 1,50,000 mtpa, it said. “The ratings also factor in the adequate capital structure supported by healthy equity infusion, which is expected to support the company’s capex plans, though project execution risks remain in terms of any time and cost over-run. Post the expansion, the company will benefit from increased scale and other operational synergies, which are expected to strengthen its overall operating profile,” it added.

Earlier, the board of the company had approved sub-division of equity shares of the company from face value of ₹5 each to face value ₹1 each, effective from August 25, 2022.