• The company is in SAP consulting services, but its financial performance is not up to mark.
• It posted inconsistency in financial performance with loss for H1 of FY24.
• The issue appears greedily priced and has no match in its working.
• There is no harm in skipping this pricey RI.
ABOUT COMPANY:
Adroit Infotech Ltd. (AIL) was originally formed as Rusoday Mutual Funds Ltd. in March 1990, and changed its name to Rusoday Finance Ltd., and again to Global Fiscals Ltd. in June 1996. The name of company was further changed to Arham Fiscals Ltd., in April 1997, and to Color Chips (India) Ltd. in January 2000. Again name was changed to Sphere Global Services in October 2014, and finally to Adroit Infotech Ltd. in the same month. Thus the company has been rechristening itself frequently.
Currently it is a Specialist SAP Consulting Company, with close to two decades of experience in helping organizations significantly reduce costs and improve effectiveness and efficiency through internal process improvements using SAP products and solutions. It has consciously focused on the Large Enterprise & Mid-Market - as its area of expertise for development. As a result, the company is capable of partnering with customers right from first consultation, process analysis, and implementation - to rollouts, ongoing support, maintenance, and upgrades.
AIL's consultants have experiences from domestic as well as international projects. Ensuring the value of SAP investment takes more than software. It takes Adroit Consulting - and the expertise and skill it gained over the years. With a formidable team, deep domain and technical expertise, and innovative engagement models, Adroit Infotech can provide the depth and breadth of coverage that business demands. As a result, Adroit is a valued member of the SAP ecosystem. The offer document is silent on its employees' strength.
ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 32501058 equity shares of Rs. 10 each with a fixed price of Rs. 15 per share to mobilize Rs. 48.75 cr. The issue opens for subscription on February 07, 2024 and will close on February 16, 2024. The company is offering RI in the ratio of 3 for 2 to its eligible stakeholders as of the record date of January 19, 2024. The company is asking for a payment of Rs. 3.75 per share (25%) on application and the rest by way of one or more call as to be decided by the company from time to time. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 0.55 cr. for this RI process and from the net proceeds, it will utilize Rs. 17.50 cr. for business expansion, Rs. 7.55 cr. for pay-off on non-current liabilities., Rs. 6.53 cr. for working capital, Rs. 10.00 cr. for acquisitions of business in similar space, and Rs. 6.62 cr. for general corporate purposes.
This RI is self-managed by the company and Venture Capital land Corporate Investments Pvt. Ltd. is the registrar of the issue while Navigant Corporate Advisors Ltd. is the advisor to the issue.
Post-RI, company's current paid-up capital of Rs. 21.67 cr. will stand enhanced to Rs. 54.17 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 81.25 cr. (There is a mistake in post-RI outstanding capital of the company on page no. 45 of the offer document as its shows the figure of RI quantum as post-RI equity).
FINANCIAL PERFORMANCE:
The offer document has blur pages for the financial performance of the company. (page no. 47 to 58 and also page F13 to F109). However, based on the info given on page no. 128 to xxx, the company has (on a consolidated basis) posted a turnover/net profit/ - (loss) of Rs. 6.49 cr. / Rs. 0.62 cr. (FY22), Rs. 22.72 cr. / Rs. 3.78 cr. (FY23). For H1 of FY24 ended on September 30, 2023, it posted a loss of Rs. - (0.29) cr. on a total income of Rs. 10.13 cr. Thus the company has marked inconsistency and erratic financial performance for the reported periods.
DIVIDEND POLICY:
The company has not declared any dividends for the reported 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: 532172 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 30.41 on January 18, 2024, and opened on an ex-right basis at Rs. 20.75 on January 19, 2024. Since then, it has marked a high/low of Rs. 20.75 / Rs. 17.89. The scrip last closed at Rs. 17.92 as of February 02, 2024. For the last 52 weeks' it has posted a high/low of Rs. 23.29 / Rs. 11.49. The counter is well managed by the vested interests above the RI pricing to tempt investors. The counter is currently under ESM Stage-2.
The promoters' holding has declined from 50.01% as of June 30, 2023, to 46.31% as of December 31, 2023.
Review By Dilip Davda on February 4, 2024
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
