Rajapalayam mills ltd – value unlocking possible?

I think this microcap needs attention.

Mcap – 540 cr.
Yearly sales – 850 cr.
Market value of investments ~ 2700 cr.

I was following this company from past few years purely as a holding company which has not played out from value unlocking perspective. However, my view has changed a bit because of following –

1. Company has done a huge capex in last 2 years to add capacity and modernize current machinery. To give a context –
   Total capex = approx. current market cap.

2. They have used a bit of their holding company shares (sold some ramco cements ~ 90 cr. and some rights issue). In their AGM they mentioned that they intend to buy back Ramco cements again. Broadly to me the holding acts as a cushion and as long as they are used for investing in their own business – one should worry less. Should watch out for ROCE for next couple of years. I have started seeing it as not a value unlocking play but a separate cash generating company with additional cushion from investments.

3.This is one of the few companies I could find where sales is on constant rise maintaining the margin.

4. Management is fairly conservative but last 2 years AR have sections where we can spot change in their vision –

You can read more about in their ARs and AGMs (last 3 years videos are on youtube)

5. I am unsure of the future demand – There can be China + 1, pakistan +1 etc. but sales numbers are encouraging.