Rajapalayam mills ltd – value unlocking possible?

I have a decent position here and my thesis is:

• Holding co taking leverage on their own standalone business is a very big trigger. Its not just a core investment co to be valued at 70-80% discount now.
• Capex done in textile business in last 5 years is 800-900crs as per crisil. 500-600crs in last 2 years of which 60% is already contracted with buyers. Exports to Japan market which is very tough to crack.
• Investment of 2600crs in Ramco cement shares. Best way to play Ramco cement shares.
• Focus is on value added yarns like mercerized yarn and now forms 20% of topline. Focus on Value-add creates value.
• Decent group and no major corporate governance issues. Should unlock value for minority shareholders if it wants to. Rajapalayam Mills was the first business of Ramco group.
• Can get good terms from bankers since common group borrowing. Has 75-80% of the power requirement own sources.

Triggers going forward and some crystal ball gazing:

• Consolidation of Ramco group’s textile business into 1 or organizational restructuring to better focus on the textile business. Simplification of shareholding structure of the group can also unlock value here.
• New CEO appointment since current CEO is aged.
• Textile sector tailwinds with UK FTA.
• Sale of Ramco cement shares where they have got approval (they instead purchased shares of Ramco recently).
• Ramp-up of fabrics unit and operating leverage.

Issues:

• No focus yet from the Ramco group.
• Corporate guarantees given to unlisted promoter groups (provided some total 60-70crs of guarantee)
• Instead of board approval to sell Ramco shares, they have recently purchased it.
• Huge capex done recently which can be negative if Industry doesn’t improve. Additionally, Ramco cement is on capex spree as well.
• Labour related issues.
• Textiles business – a deep cyclical industry

Your different views accepted.