Stock of this SME electrical equipment maker has zoomed 500% in two months

Shares of RMC Switchgears were locked at the 5 per cent upper circuit at Rs 264.25, also its record high on the BSE on Friday at 10:05 AM. The stock of this electrical equipment company was frozen at the upper circuit for the 41st straight trading day. In past two months, the stock zoomed a whopping 500 per cent from a level of Rs 44, the BSE data shows.

RMC Switchgears is engaged in manufacturing of LT/HT Distribution Boxes and Panels, Junction Boxes, Feeder Pillars, other Power Distribution, Circuit Protection Switchgears, PVC designer UV Sheets & Acrylic Solid Surface products.

RMC Switchgears trades in the SME segment under the "MT" group on the BSE. The BSE SME scrips which are listed under the "M" group (trading and clearing & settlement is done on a net basis) and those listed under "MT" group (trading and clearing & settlement done on gross basis).

RMC mainly bids for tenders of various governments DISCOM’s. As on May 31, 2022, RMC has an unexecuted order book of around Rs 112.96 crore which is around 2.72 times of FY22 revenue providing strong revenue visibility. Additionally, company has been declared L1 for an Rs 236 crore order from Maharashtra State Electricity Dist. Co. Ltd. The pending orders are expected to be executed in coming one to two years suggesting viable short to medium term revenue visibility.

For the first half (April-September) of the current financial year 2022-23 (H1FY23), RMC reported profit after tax of Rs 6.14 crore, as against Rs 0.47 crore in H1FY22. Operational income during the period grew 224 per cent year-on-year at Rs 58.03 crore from Rs 17.90 crore in year ago period.

On October 21, RMC said that based on rating assessment undertaken by Infomerics Valuation and Rating Private Limited, the company's credit rating has been upgraded to IVR BB-/Stable.

The ratings assigned to the bank facilities of RMC Switchgears derives comfort from long operational track record of the company under experienced promoters, satisfactory order book position indicating a revenue visibility with reputed clientele base.

Further, the ratings also note improvement in the scale of operation of the company in FY22 and in Q1FY23 coupled with satisfactory capital structure and moderate debt protection metrics. Moreover, the company is planning to issue fresh equity shares by way of preferential allotment which would further strengthen the company’s net worth position in the near term, the rating agency said.

These rating strengths are partially offset by its small scale of operation, past instances of delay, tender driven nature of business, exposure of client concentration coupled with high working capital intensive nature of its operation, it added.

RMC has low outstanding equity shares of 6.09 million as on September 30, 2022. The promoters held 55.60 per cent stake in the company. The remaining 44.40 per cent holding are with the individual shareholders (31.02 per cent), bodies corporate (7.83 per cent) and others (4.66 per cent), the shareholding pattern data shows.