Advik Cap RI - Sept 23 review - (Avoid)

•    ACL is in the field of financial servicing and manufacturing and trading in Electronic products.
•    Diverse activities boosted its top and bottom lines for FY23.
•    This is the second rights issue from the company in the last two years.
•    Higher equity base post this issue raises concern over its servicing. 
•    There is no harm in skipping this "High-risk/Low return" bet. 

PREFACE:
This is the 2nd RI from the company in the year last two years. Its first RI came in the month of March 2022 at a price of Rs. 2.85 per share to mobilize Rs. 49.68 cr. and now it has planned to mobilize Rs. 49.91 cr. with its 2nd RI. 

ABOUT COMPANY:
Advik Capital Ltd. (ACL) is a non-deposit-taking Non-Banking Financial Company registered with the RBI. The Company is engaged primarily in the business of providing financial loans and in providing ancillary services related to the said business activities.

In the year 2013, it formed a subsidiary in the name of Advik Optoelectronics Limited (AOL) to further diversify activities of trading and manufacturing of electronic products. Presently, it holds 57.99% of the total issued and paid-up share capital of AOL. 

AOL is engaged in the business of manufacturing various kinds of emergency life safety signage, evacuation systems made of phosphorescent effect, photo luminescent, glow sign boards, led boards, led electronic boards, life safety apparel, road safety signage, lights, emergency lights, and equipment.

Further, in the year 2022, ACL formed a wholly owned subsidiary in the name of Advikca Finvest Limited (AFL) to deal in the securities market and investment consultants. Presently, the Company holds 100% of the total issued and paid-up share capital of AFL.
 
AFL is engaged in the business of dealing in shares, securities, right interests, and obligations in movable and immovable assets of all kinds, with infinite technology, and advanced techniques, and to acquire, buy, sell, hold, trade, dispose of, or otherwise deal in shares. The offer document is silent on its human resources data. 

ISSUE DETAILS:
The company is coming out with a Right Issue (RI) of 207960320 equity shares of Re. 1 at a fixed price of Rs. 2.40 per share to mobilize Rs. 49.91 cr. The issue has already opened for subscription on September 18, 2023, and will close on September 29, 2023. The company is offering RI in the ratio of 17 shares for every 18 shares held by the eligible stakeholders as of the record date of September 07, 2023. The full amount is to be paid on the application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.91 cr. for this RI process, and from the net proceeds, it will utilize Rs. 36.75 cr. for working capital and Rs. 12.25 cr. for general corporate purposes. 

Fast Track Finsec Pvt. Ltd. is the sole lead manager and Hexaxis Advisors Ltd. is the advisor to the issue. Skyline Financial Services Pvt. Ltd. is the registrar of the issue. 

Post-RI, ACL's current paid-up equity capital of Rs. 22.02 cr. will stand enhanced to Rs. 42.82 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 102.76 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, ACL has (on a consolidated basis) posted a total revenue/net profit of Rs. 6.26 cr. / Rs. 0.07 cr. (FY21), Rs. 46.46 cr. / Rs. 0.44 cr. (FY22), and Rs. 604.29 cr. / Rs. 9.35cr. (FY23).

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: 539773 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 2.55 on September 06, 2023, and opened on an ex-right basis at Rs. 2.52 on September 07, 2023. Since then, it has marked a high/low of Rs. 2.63 / Rs. 2.49. The scrip last closed at Rs. 2.62 as of September 20, 2023. For the last 52 weeks, it has posted a high/low of Rs. 5.01/ Rs. 1.90. The counter is currently under ESM - Stage II. The counter is well-operated and kept above the RI pricing to tempt investors. 

The promoters' holding which was at 7.89% for the quarter ended December 31, 2022, has increased to 21.80% for the quarters ended March 31, 2023, and June 30, 2023.