Ace Software RI review - (Apply)

•    The company is primarily engaged in the business of document management, digital publishing, data conversion solutions and technology consulting with related services.
•    The RI is priced very attractively at over 75% discount to its last traded price. 
•    The company gained ground post its recent acquisitions and is now on a fast track mode.
•    Investors may lap it up for medium to long term. 

PREFACE:
For this RI, the offer documents were made available on BSE only on December 14, 2024, eve, while the offer document is dated December 04, 2024. The delay in uploading the offer documents on designated exchanges is turning worrisome now a day. Can regulators or concern authorities throw some light on this?? 

ABOUT COMPANY:
Ace Software Exports Ltd. (ASEL) is primarily engaged in the business of document management, digital publishing, data conversion solutions and technology consulting employing efficient process engineering and adaptable conversion systems catering to clients at U.S. and Australia. Furthermore, in April 2024, there was a significant change in the management of the Company due to an open offer in accordance with the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, triggered, Pursuant to the execution of the Share Subscription Agreement (“SSA”). 

With the intention of growth and business diversification, the Company has acquired 80,000 equity shares of face value of Rs. 10/- each representing 40% of the paid-up equity share capital vide share purchase and subscription agreement dated January 06, 2024 of Ace Infoway Private Limited (AIPL), a company engaged in the business of product engineering, digital transformation, integrations, data analytics, machine learning (ML), web & mobile application development, website development, platform migrations, ecommerce development and cloud development catering to clients at U.S. and Australia.

ASEL vide a ‘Supplement LLP Agreement’ dated April 10, 2024, has also invested Rs. 9.63 cr. for acquisition of 40% partnership interest in QeNomy Digital LLP. QeNomy is engaged in the business of web/software development, mobile applications, digital marketing and other allied IT Services catering to clients at U.S. and Australia. The Company vide a ‘Supplement LLP Agreement’ dated February 15, 2024 has also invested Rs. 2.86 cr. for acquisition of 40% partnership interest in QeCAD Studio LLP. QeCAD Studio LLP is engaged in the business of delivering architectural CAD, BIM and rendering digital solutions, 3D modeling globally such as U.S. and Australia.

By abovementioned acquisitions, AIPL has become a subsidiary of the Company and QeNomy Digital LLP and QeCAD Studio LLP have become controlled entities of the Company. As of October 31, 2024, it had 420 employees on its payroll.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 6400000 equity shares of Rs. 10 each at a fixed price of Rs. 78 per share to mobilize Rs. 49.92 cr. The RI opens for subscription on December 16, 2024, and will close on December 27, 2024. The is asking for 50% payment (i.e. Rs. 39 per share) on application and the balance by one or more subsequent calls, as determine by the company from time to time.  The company is offering RI in the ratio of 1 for 1 to its eligible stakeholders as of the record date of December 05, 2024. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.48 cr. for this RI process, and from the net proceeds, it will utilize Rs. 12.90 cr. for acquiring balance 60% equity in Ace Infoway Pvt. Ltd., Rs. 14.45 cr. for investment in QeNomy Digital LLP as capital contribution, Rs. 2.86 cr. for investment in QeCAD Studio LLP as capital contribution, Rs. 8.00 cr. for additional investment in AQE Techtools Pvt. Ltd. by way of subscription of equity shares, and Rs. 11.23 cr. for general corporate purposes. 

The RI is solely lead managed by Vivro Financial Services Pvt. Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post-RI, company’s current paid-up capital of Rs. 6.40 cr. ill stand enhanced to Rs. 12.80 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 99.84 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted total income/net profit/ - (loss) of Rs. 10.59 cr. / Rs. – (0.81) cr. (FY22), Rs. 10.76 cr. / Rs. 0.11 cr. (FY23), Rs. 29.76 cr. / Rs 5.35 cr. (FY24), For H1 of FY25 ended on September 30, 2024, it posted net profit of Rs. 2.43 cr. on a total income of Rs. 11.63 cr. The company marked push in its activities and earnings post acquisitions.

DIVIDEND POLICY:
The company has not declared any dividends for the referred periods of the offer document. 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: 531525 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 425.40 on December 04, 2024, and opened on an ex-right basis at Rs. 246.85 on December 05, 2024. Since then, it has marked a high/low of Rs. 315.35 / Rs. 246.85. The scrip last closed at Rs. 315.35 as of December 13, 2024. For the last 52 weeks’ it has posted a high/low of Rs. 315.35 / Rs. 21.23. The counter is currently under ESM: Stage 1. Based on its last traded price, the RI is attractively priced at a discount of around 75.27%.

The promoters’ holding has declined to 63.24% for the last two quarters ended with Sept. 30, 2024, against 74.96% for June 30, 2024 quarter. The counter is well managed above the RI by vested interests to lure investors.