A F Enterprises RI review - (Avoid)

•    The company is operating in a highly competitive and fragmented segment.
•    Its financial data is not impressive and in line with the asking price. 
•    Surprised surge in the bottom line for 3Qs of FY23 appears window dressing.
•    Higher equity base post-RI may pose servicing issues.
•    There is no harm in skipping this greedy RI offer.

ABOUT COMPANY:
A F Enterprises Ltd. (AFEL) was incorporated under the name and style of A F Investments Pvt. Ltd. got converted into a public limited company and then opted for a name change. It is currently engaged in the trading and production/manufacturing range of products encompassing plastic moulded components under the brand name of RIDH. The segment in which the company operates is highly competitive and fragmented. The offer document is silent on the data of its employee count.

ISSUE DETAILS:
The company is coming out with a rights issue (RI) of 22581817 equity shares of Rs. 10 each at a fixed price of Rs. 19 per share to mobilize Rs. 42.91 cr. The issue opens for subscription on April 05, 2023, and will close on April 20, 2023. The company is offering RI in the ratio of 8 equity shares for every 5 equity shares held as of the record date of March 22, 2023, to eligible stakeholders. The full amount is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.25 cr. for this RI process, and from the net proceeds, it will utilize Rs. 40.00 cr. for working capital, and Rs. 2.66 cr. for general corporate purposes.

The issue is self-managed by the company itself under the advisory of Navigant Corporate Advisors Ltd. and First Overseas Capital Ltd. and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. 

Post RI, AFEL's current paid-up equity capital of Rs. 14.11 cr. to Rs. 36.70 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 69.72 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, the company has (on a consolidated basis) posted a turnover/net profit of Rs. 37.81 cr. / Rs. 1.05 cr. (FY21), Rs. 51.01 cr. / Rs. 1.12 cr. (FY22). As per unaudited consolidated results submitted to the exchange, the company has posted a 2.27 on a turnover of Rs. 9.75 which appears to have been window dressed to get the fancy valuations for the RI. 

DIVIDEND POLICY:
The offer document is silent on the company's dividend policy. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 538351 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 14.37 on March 20, 2023, and opened on an ex-right basis at Rs. 14.70 on March 21, 2023. Since then, it has marked a high/low of Rs. 15.68 / Rs. 12.70. The scrip last closed at Rs. 13.68 as of April 03, 2023. For the last 52 weeks, it has posted a high/low of Rs. 138.90 / Rs. 7.83. The promoters' holding has been almost constant at 6.25% from July 12, 2022, till December 31, 2022. The counter has been trading at a lower than RI pricing which is a real wonder.