AKG Exim RI (NSE) review - (May apply)

•    AEL is in the trading business for commodities and healthcare-related services.
•    Its earnings track record shows average performance. 
•    RI is at a hefty discount to its current market price. 
•    Cash surplus investors may consider investment for the medium to long-term rewards.
 
PREFACE:
AKG Exim came out with its maiden IPO for NSE SME Listing in September 2018 to mobilize Rs. 5.52 cr. with an issue of 1780000 equity shares of Rs. 10 each at a fixed price of Rs. 31 per share. The listing took place at Rs. 32.25 per share and closed on the debut day at Rs. 32 per share. This issue was subscribed to 1.18 times then. The company is now coming out with a rights issue (RI) at a fixed price of Rs. 12 per share to mobilize Rs. 25.42 cr. Thus it made the maiden IPO at a fancy price and now coming with RI at a lower price. Isn't it surprising?

ABOUT COMPANY:
AKG Exim Ltd. (AEL) is a diversified merchant trading company with a vast range of products & commodities with a quality management system. The company is a merchandiser, and distributor of a variety of products including Non-Basmati Rice, Metal Scrap, Aluminium scrap, Iron Scrap, Spices, Dry Fruits, etc. 

AEL connects the seller and the markets while ensuring lasting prosperity and sustainable supply at both ends. The Company is catering to a large number of customers with a concentration on the Indian and overseas subcontinent. With a steady expansion in the market, the company is consistently aiming to achieve its mission of providing world-class customer services. 

It has ventured into the health and wellness vertical by endorsing as an exclusive channel partner of Immunity bloom which is a health and nutritional supplement expert to develop the best quality health products based on plant science and pure plant extracts. These products are developed by Saveer Biotech Ltd with their past experience of 10 years involving research & innovation to create high-quality nourishing dietary fibre supplements for building a healthy and better India. As of September 30, 2022, its paid-up equity capital of Rs. 10.59 cr. is supported by free reserves of Rs. 13.15 cr. The offer document is silent on the strength of its human resources.

ISSUE DETAILS:
The company is now offering a rights issue of 21184384 shares of Rs. 10 each at a fixed price of Rs. 12 per share to mobilize Rs. 25.42 cr. It is offering 2 shares for every 1 share held to eligible shareholders registered as of the record date of December 16, 2022. The issue has already opened for subscription on December 29, 2022, and is closing on January 25, 2023.  The full amount is to be paid on the application for the number of shares applied. Post allotment, shares will be listed on NSE. AEL is spending Rs. 0.20 cr. for this RI process and from the residual funds, it will utilize Rs. 19.22 cr. for the working capital, Rs. 6.00 cr. for general corporate purposes. 

The issue is solely lead-managed by Navigant Corporate Advisors Ltd. and MAS Services Ltd. is the registrar of the issue. 

Post RI, AEL's current paid-up equity capital of Rs. 10.59 cr. will stand enhanced to Rs. 31.78 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 38.13 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, AEL has (on a consolidated basis) posted a total income/net profit of Rs. 104.58 cr. / Rs. 1.37 cr. (FY21), and Rs. 186.80 cr. / Rs. 1.94 cr. (FY22). 

As per the unaudited results filed with the exchange, for the H1 of FY23, the company earned a net profit of Rs. 0.76 cr. on a total income of Rs. 95.82 cr.  

DIVIDEND POLICY:
The offer document is silent on the company's dividend policy. It will adopt a prudent dividend policy post-listing of RIs based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON NSE WEBSITE DATA: SCRIP CODE: AKG (FV Rs. 10).
The scrip last closed at Rs. 73.30 on cum-right basis as of December 15, 2022, and opened at Rs. 33.95 on an ex-right basis as of December xx, 2022. Since then, it has posted a high/low of Rs. 45.35 / Rs. 33.95. It last closed at Rs. 37.45 as of December 30, 2022. The scrip has marked the last 52 weeks' high/low of Rs. 45.35 / Rs. 11.87. The promoter's holding has seen declining trends as it got reduced from 67.76% (Dec. 21 quarter) to 62.09% (Sept. 22 quarter).