Aruna Hotels RI review - (Avoid)

•    AHL ventured into many businesses in past and gave up with unsuccessful attempts.
•    At present it is mulling the hotel business and spending money on it.
•    Its financial data showing a very poor track record with a negative NAV.
•    There is no harm in staying away from this at par RI.

ABOUT COMPANY:
Aruna Hotels Ltd. (AHL) was known as Aruna Sugars and Enterprises Ltd. and was engaged in a sugar plant. In 1986 it took over the ferric alum plant from SAS Chemicals to enter the chemical business. In 1987 it took over Geetha Flour Mill's wheat milling plant but discontinued it by 1994-95. In 1990 it ventured into a business class hotel in Chennai and since then it is developing it. In 1998-99 it disposed of its sugar plant being an under-performing business.  It also divested its chemical business in 2002-03 considering a bleak future for alum business. Currently, AHL is continuing with its hotel project and renovating it and these activities will be over by the current fiscal end. Soon thereafter, it will go full-fledged in the hotel business with a capacity of 80 rooms. 

ISSUE DETAILS:
To part finance its plans for repayment/prepayment of unsecured loans from promoter's group (Rs.  20.50 cr.) and general corporate fund needs (Rs. 4.00 cr.), AHL is coming out with a rights issue in the ratio of 83 shares for every 30 shares held as of the record date on July 23, 2021. The company will be issuing 24900000 equity shares of Rs. 10 each at par and mobilizing Rs. 24.90 cr. The issue opens for subscription on September 29, 2021, and will close on October 13, 2021. Post allotment, shares will be listed on BSE.  The company will be spending Rs. 0.40 cr. for this RI process.

The issue is solely lead managed by Saffron Capital Advisors Pvt. Ltd. and Cameo Corporate Services Ltd. is the registrar to the issue. 

Post issue AHL's current paid-up equity capital of Rs. 9.00 cr. will stand enhanced to Rs. 33.90 cr. Based on RI pricing, the company is looking for a market cap of Rs. 33.90 cr. Promoters are holding 52.74% equity as of June 30, 2021. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for the last three fiscals, AHL has posted a total income / net profit (loss) of Rs. 0.83 cr./ Rs. - (9.79) cr. (FY19), Rs. 0.10 cr. / Rs. - (7.89) cr. (FY20) and Rs. 0.33 cr./ Rs. - (10.08) cr. (FY21). Thus it has been incurring losses for all these years.  As per restated financial data as of March 31, 2021, its equity capital of Rs. 12.10 cr. has negative other equity (i.e. carried forward losses) of Rs. (87.43) cr. translating into a negative NAV of Rs. (83.70). It has posted a loss of Rs. 1.28 cr. with no income for Q1 of FY22 ended on June 30, 2021. 

DIVIDEND POLICY:
The company has not paid any dividend in all these years. There is no guarantee of any dividend in coming years as well following negative net worth. 

SCRIP PERFORMANCE ON BSE:
The scrip last quoted on cum-right basis at Rs. 26.07 on July 20, 2021, and turned ex-right at Rs. 14.96 on 22nd July 2021. Since then it has marked high/low of Rs. 20.00/ Rs. 11.40 and its last quote is Rs. 17.34 with market operations amidst thin volume. It has posted 52 weeks high/low of Rs. 20.00 / Rs. 2.42 and at the last traded price its market cap stands at Rs. 58.78 cr.