• ACL is engaged in the business of funding and providing business-related ancillary services.
• Its financial track record shows inconsistency.
• Issue is exorbitantly priced on the basis of its latest performance.
• The company is in a highly competitive and fragmented segment.
• There is no harm in ignoring this pricy rights issue.
ABOUT COMPANY:
Advik Capital Ltd. (ACL), the company originally incorporated as Quick Credit Ltd. in 1985 kept changing its name frequently. It changed its name to DU Lite Industries Ltd. in 2010 and then to Advik Industries Ltd. in 2011 and then to its current name in 2017.
The Company is a non-deposit taking Non-Banking Financial Company registered with the RBI. It is engaged primarily in the business of providing financial loans and in providing ancillary services related to the said business activities.
As of September 31, 2021, its loan portfolio was Rs. 6.20 cr. comprising of the short term loans to a few corporate clients.
The company has been informed by its Promoter and Promoter Group that they shall not subscribe to their entitlements arising out of the proposed Rights Issue and may renounce them in the favour of third parties. Therefore, the non-applicability of minimum subscription criteria provided in regulation 86(1)(b) of the SEBI ICDR Regulations is not met. Minimum subscription is thus applicable for the proposed Rights Issue. Pursuant to regulation 86(2) of the SEBI ICDR Regulations in case of non-receipt of minimum subscription, all application monies received shall be refunded to the applicants forthwith, but not later than four days from the closure of the Rights Issue.
ISSUE DETAILS:
To part finance its needs for working capital (Rs. 36.50 cr.), general corporate purpose (Rs. 12.15 cr.), ACL is offering 174319680 rights equity shares of Re. 1 each at a fixed price of Rs. 2.85 per share to mobilize Rs. 49.68 cr. It is offering rights shares in the ratio of 19 for 5 to the shareholders whose names were registered on the record date i.e. March 11, 2022. The issue opens for subscription on March 21, 2022, and will close on April 07, 2022. Post allotment, shares will be listed on BSE. Applicants have to pay the full amount on the application. It will be spending Rs. 1.03 cr. for this RI process. As of December 31, 2021, the promoter's holding was 37.90%.
The issue is managed by the company itself and Skyline Financial Services Pvt. Ltd. is the registrar to the issue.
Post issue, ACL's current paid-up equity capital of Rs. 4.59 cr. will stand enhanced to Rs. 22.02 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 62.76 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, it has (on a consolidated basis) posted income/net profit of Rs. 7.55 cr. / Rs. 0.11 cr. (FY20) and Rs. 6.28 cr. / Rs. 0.06 cr. (FY21). Thus it marked inconsistent trends for its top and bottom lines. For 3Qs of FY22 ended on December 31, 2021, it has earned a net profit of Rs. 0.34 cr. on total income of Rs. 12.45 cr. As of December 31, 2021, its NAV stood at Rs. 2.66. Boost in its working for FY22 so far raises eyebrows and concern on sustainability.
The issue is priced at a P/BV of 1.07 based on its NAV of Rs. 2.66 as of December 31, 2021. Based on this working, the issue is priced at a P/E of 142 plus, making it a costly bet.
DIVIDEND POLICY:
The company has no dividend track record for the reported period in the offer documents. It will adopt a prudent dividend policy post this issue based on its financial performance and future prospects.
SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 539773
The scrip last closed on cum-right basis at Rs. 3.61 on March 09, 2022, and opened on the ex-rights basis at Rs. 3.05 on March 10, 2022. Since then, it has posted a high/low of Rs. 3.99 / Rs. 2.86. It last closed at Rs. 3.99 (on March 17, 2022) and based on this closing, its market cap on post-RI stands at Rs. 87.86 cr. It has posted the last 52 weeks high/low of Rs. 3.99 / Rs. 1.08. Its promoter's holding has been declining as it has come down to 37.90% as of 31.12.2021 against 59.07% as of 30.06.2021.
This counter is well managed in the market despite small promoter holding.
Review By Dilip Davda on March 18, 2022
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.
