Asit C Mehta RI review - (Avoid)

•    ACMFSL is in the business of financial services related to stock markets.
•    Since FY23 it has been posting losses.
•    The issue is negatively priced considering loss for H1-FY24,
•    There is no harm in skipping this pricey bet. 

PREFACE:
The company got a strategic investment from Cliqtrade Stock Brokers Pvt. Ltd., an arm of Pantomath group and as a result Mr. and Mrs. Lunawat became directors on the board of ACMFSL. 

ABOUT COMPANY:
Asit C Mehta Financial Services Ltd. (ACMFSL) is a leading technology led integrated financial services organization having presence through its subsidiary companies Asit C. Mehta Investment Interrmediates Limited and Edgytal Fintech Investments Services Private Limited, these services includes Stock Broking, Portfolio Management Services, Wealth Management and FINTECH. Its material subsidiary, Asit C. Mehta Investment Interrmediates Limited (ACMIIL) is member of BSE, NSE and Depository Participant of CDSL.

ACMIIL is a leading brokerage house with strong presence in the retail market with over 1,45,000 registered clients as on 18th August, 2023. Its journey started with select HNI investors wanting to invest through Bombay Stock Exchange in listed equities. Over a period of time, the range of investors expanded to pure retail, HNIs, NRIs, corporates, mutual funds and few FIIs. The stock exchanges transformed from an open outcry system to highly sophisticated technology based digital market infrastructure reaching out to all the investors across the globe including the most remote part of the country.

It has kept pace with the new technologies getting introduced in the exchanges in particular and Businesses in general. Currently, the company services customers through the most advanced technologies including mobile app `investmentz' the trading system is also available through desktop version. Its retail locations across the geography use highly sophisticated CTCL version giving the benefit of technology to the remotest part of the country.

It helps investors to invest in listed equity through BSE and NSE. The investments made through the exchanges are held in dematerialized digital form with depository. The trading data and holding details are available online. The investors can also participate in the Initial Public Offer (IPO) as and when a new business decides to invite investment through participation by retail and institutional investors by way of listing. The company also distributes Mutual Fund schemes for investors who prefer an expert fund house to manage their equity exposure. 

It makes available the facility to participate in exchange based derivative products in equity and currency. The largest chunk of volume growth has occurred in exchange-based equity derivative products comprising of futures and options. Equity derivative products are a good tool to hedge equity portfolio. However, a larger part of the participation is view based trading. It provides limited margin funding. The company also holds portfolio management license required by SEBI to offer PMS services to HNIs. It has an active PMS desk with Rs. 62.31 crores under management as on July 31, 2023, as stockbrokers it is permitted to offer advisory services to its retail investors. It provides advisory information to investors based on their holdings. As of 18th August, 2023 it had 145592 registered investors, 153 Authorized Persons, 197 business associates and 780 (number) marketing agents. The company has presence in appx. 218 cities in terms of its retail presence.

ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 3293452 equity shares of Rs. 10 each at a fixed price of Rs. 137.45 per share to mobilize Rs. 45.27 cr. The issue opens for subscription on December 22, 2023, and will close on January 04, 2024. The company is offering RI in the ratio of 133 shares for 200 shares held by eligible stakeholders as of the record date of December 15, 2023. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.17 cr. for this RI process and from the net proceeds, it will use 7.20 cr. for repayment of outstanding loans given by Mehta family, Rs. 3.10 cr. for repayment of corporate deposit, Rs. 2.50 cr. for acquisition of shares of Omniscience Capital, Rs. 1.33 cr. for acquisition of shares of ACMIIL from Kirit Vora, and Rs. 3.69 cr. for general corporate purposes. The conversion of loans given by Cliqtrade Stock Brokers will be adjusted toward RI allotment to the tune of Rs. 27.45 cr. Here appears to be some mismatch for the issue expenses of Rs. 0.17 cr. 

The issue is self-managed by the company and Link Intime India Pvt. Ltd. is the registrar of the issue. 

Post-RI, company's current paid-up equity capital of Rs. 4.95 cr. will stand enhanced to Rs. 8.25 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 113.34 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit/ -(loss) of Rs.39.24 cr. / Rs. 2.26 cr. (FY21), Rs. 41.54 cr. / Rs. 1.46 cr. (FY22), and Rs. 33.83 cr. / Rs. - (9.31) cr. (FY23). As per the submission to the BSE, for H1 of fY24, the company has posted a loss of Rs. - (6.75) cr. on a total income of Rs. 20.39 cr. Thus since FY23 the company has been reporting losses.

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. The company last paid a dividend of 5% in August 2010.

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 530723 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 212.00 on December 14, 2023, and opened on an ex-right basis at Rs. 188.00 on December 15, 2023. Since then, it has marked a high/low of Rs. 188.90 / Rs. 153.30. The scrip last closed at Rs. 159.00 as of December 21, 2023. For the last 52 weeks' it has posted a high/low of Rs. 202.79 / Rs. 86.00. The counter is currently under ESM Stage-1.

The promoters' holding has declined to 74.99% as of November 17, 2023 against 77.53 as of September 30, 2023, and June 30, 2023. The counter is well managed above the RI price to lure investors.