Adcon Capital RI review (Avoid)

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•    ACSL is engaged in the financial services segment. 
•    Its post-RI equity will rise over 8 fold raising concern for servicing. 
•    Current minuscule financial performance also 
•    There is no promoter holding, which is a big negative factor.
•    There is no harm in skipping this high-risk/low-return bet.

Adcon Capital Services Ltd. (ACSL) is a Non-Deposit taking Non-Banking Financial Company (NBFC) registered with RBI to carry on the NBFI (Non-Bank Financial Institution) activities under Section 45IA of the Reserve Bank of India Act, 1934.

The company is engaged in the business of providing financial loans and in providing ancillary services related to the said business activities. In its lending business, the company mainly focuses on providing financial services with a paramount focus on Micro, Small, and Medium Enterprises (MSMEs) small and medium enterprises (SMEs), and corporate and non-corporate sectors.

Its loan portfolio as of September 30, 2022, is Rs. 2.38 cr. It provides both secured and unsecured loans based on the risk profiles of the clients. ACSL is also engaged in making investments in the form of Equity in various companies, both listed and unlisted. It invests in companies in a variety of markets and stages. As of the filing date of this offer document, it has 11 employees on its payroll. 

To part finance its need for augmenting capital base (Rs. 23.59 cr.), and general corporate purpose (Rs. 5.40 cr.), ACSL is coming out with a right issue (RI) of 295925000 equity shares of Re. 1 at par value to mobilize Rs. 29.59 cr. It is offering 25 shares for every 3 shares held on the record date of December 02, 2022, to eligible shareholders. The applicant has to pay Rs. 0.90 per share on application and the rest on calls by the company from time to time. This appears to be an eyewash and a gimmick to lure investors. The issue opens for subscription on December 09, 2022, and will close on December 23, 2022. Post allotment, shares will be listed on BSE. ACSL is spending Rs. 0.60 cr. for this RI process. 

Inventure Merchant Banker Services Pvt. Ltd. is the sole lead manager for this issue while Purva Sharegistry (India) Pvt. Ltd. is the registrar of the issue. 

Post RI, ACSL's current paid-up equity capital of Rs. 3.55 cr. will stand enhanced to Rs. 33.14 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 33.14 cr. 

On the financial performance front, for the last three fiscals, ACSL has posted a total income/net profit - (loss) of Rs. 0.26 cr. / Rs. - (0.31) cr. (FY20), Rs. 0.45 cr. / Rs. 0.28 cr. (FY21), and Rs. 0.75 cr. / Rs. 0.47 cr. (FY22).

For the first half of FY23 ended on September 30, 2022, it reported a loss of Rs. - (0.23) cr. on a total income of Rs. 0.19 cr. 

The company has no dividend track record. It will adopt a prudent dividend policy post-listing of RI, based on its financial performance and future prospects. 

The scrip closed at Rs. 2.34 on cum-right basis as of December 01, 2022, and opened at Rs. 1.19 on an ex-right basis as of December 02, 2022. Since then it has posted a high/low of Rs. 1.24/ Rs. 1.19. The scrip last closed at Rs. 1.36 per share as of December 07, 2022. It has posted the last 52 weeks' high/low of Rs. 1.36 / Rs. 0.49. There is no promoter's holding in this company, the entire equity is held by the public investors. The counter is well operated by vested interests to lure investors for subscribing to this RI. At present, this counter is under ASM LT - Stage 1.

Conclusion / Investment Strategy

Though the issue is at par, over an 8-fold increase in its equity base will have servicing issues. Its current minuscule financial performance also raises concern. There is no harm in skipping this RI as it’s a high-risk/low-return bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Dec 7, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

More Adcon Capital Services Limited RI Views / Analysis / Recommendations ...

The Adcon Capital Services Rights Issue 2022 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Adcon Capital Services Rights Issue 2022 worth investing. The Adcon Capital Services Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Adcon Capital Services Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Adcon Capital Services Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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