Add-Shop RI review - (May apply)

•    ASRL is offering RI to public shareholders only.
•    It is trading in many health and food-related products. 
•    The company has posted growth in its top and bottom lines.
•    It has also made two bonus issues since listing. 
•    Declining promoter holding is a major concern. 

ABOUT COMPANY: 
Add-Shop E-Retail Ltd. (ASRL) is engaged in products like ayurvedic, food supplements, agricultural, animal feed supplements and personal care. ASRL's business activities include - Trading & Manufacturing Organic fertilizers & Animal feed supplements, Trading & Manufacturing Herbal Cosmetics & Personal Care and Trading of Ayurvedic Medicines. 

It competes directly against wholesalers and direct retailers having a substantial market share, established companies selling internationally renowned brands as well as domestic retailers and regional competitors. Many of its competitors are companies with strong brand recognition. However, the domestic segments are fragmented and continue to be dominated by unorganized and regional suppliers.  

ASRL compete primarily on the basis of brand image and quality. In order to compete effectively, it continues to maintain and develop its brand image and reputation, be flexible and innovative in responding to rapidly changing market demands and customer preferences and offer customers a wide variety of good quality products at competitive prices. As of the date of filing this offer documents, it has 29 employees on its payroll.

ISSUE DETAILS:
To part finance its needs for working capital (Rs. 46.20 cr.) and general corporate purposes (Rs. 2.00 cr.), ASRL is coming out with a right issue (RI) of 9056255 equity shares of Rs. 10 each at a fixed price of Rs. 54.00 per share to mobilize Rs. 48.90 cr. 

The company is issuing RI in the ratio of 1 share against 1 share held by the eligible (non-promoter) public stakeholders as of the record date i.e. August 08, 2022. The issue opens for subscription on August 17, 2022, and will close on August 30, 2022. The full amount is payable on the application. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.70 cr. for this RI process. 

The issue is solely lead managed by Finshore Management Services Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue.

Post RI, ASRL's current paid-up equity capital of Rs. 19.26 cr. will stand enhanced to Rs. 28.31 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 152.89 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, ASRL has posted turnover/net profits of Rs. 78.57 cr. / Rs. 7.68 cr. (FY21), Rs. 159.65 cr. / Rs. 19.09 cr. (FY22). Thus it has posted growth in its top and bottom lines for the reported periods. Since listing, it has issued twice bonus shares, 3 for 4 in July 20 and 7 for 10 in January 2022.  

As per BSE filing data, the company has earned a net profit of Rs. 5.94 cr. on a turnover of Rs. 49.63 cr. for Q1 of FY23. 

DIVIDEND POLICY:
The company has not paid any dividend for the reported periods. It will adopt a prudent dividend policy post listing of RI, based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 541865:
The scrip last closed on cum-right basis at Rs. 95.50 on August 04, 2022, and opened on an ex-right basis at Rs. 80.30 on August 05, 2022. Since then it has marked a high/low of Rs. 89.00 / Rs. 70.00. The scrip last closed at Rs. 84.25 as of August 11, 2022. Based on this quote, its post-RI market cap stands at Rs. 324.48 cr. The scrip has posted the last 52 weeks high/low of Rs. 137.46 / Rs. 55.09 (post adjustment of Ex-RI impact). Promoters' holding has declined from 63.00% as of January 20, 2022, to 52.97% for June 2022 quarter end. This will further decline post-RI and raises a bit of concern.