Cressanda Solutions RI review (Avoid)

• CSL is operating in a highly competitive field with many players around.
• Its FY23 performance appears to be window dressed to get a fancy price.
• Transparency is missing and the offer document has some anomalies.
• There is no harm in skipping this "High Risk/Low Return" bet.

PREFACE:
Though this RI is opening on June 27, 2023, its documents were loaded on the BSE website only on 26th June 2023. The date of the final prospectus is June 12, 2023. Why it took so long for the upload of offer documents is known only by BSE and the company management. Secondly, the issue size on the number of shares being issued and the price basis comes to Rs. 49.30 cr. whereas the Prospectus and the Object of the offer details show an overall size of Rs. 49.50 cr. Thus it has a difference of Rs. 20 lakhs. This needs to be clarified by the management and the exchanges.

ABOUT COMPANY:
Cressanda Solutions Ltd. (CSL) is engaged in providing cutting-edge Information technology (IT), Digital Media and IT-enabled services. Cressanda through its subsidiaries and business partners specialises in the areas of Digital and Analytics solutions, Machine Learning and Artificial Intelligence. it has embarked on a transformative journey to innovate, expand and integrate technology offerings with capabilities to service large institutional opportunities. These services will have a deep positive societal impact besides having a profitable and long-term financial profile for the company. As of the date of filing this offer document, it had 16 employees on its payroll.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 24649206 equity shares of Re. 1 each at a fixed price of Rs. 20 per share to mobilize Rs.49.30 cr. The RI opens for subscription on June 27, 2023, and will close on July 11, 2023. The company is offering RI in the ratio of 6 for 97 to eligible stakeholders as of the record date of June 16, 2023. It is asking only 50% i.e. Rs. 10 per share on application and the balance is to be paid by one or more calls from time to time by the company. CSL is spending Rs. 1.10 cr. for this RI process and from the net proceeds, it will utilize Rs. 39.60 cr. for working capital, Rs. 8.80 cr. for general corporate purposes. On the basis of this tally, the overall issue size comes to Rs. 49.50 whereas as per the number of shares and the RI price it comes to Rs. 49.30 cr. This anomaly needs to be clarified by the company.

The issue is self-managed by the company and Skyline Financial Services Pvt. Ltd. is the registrar of the issue.

Post-RI, CSL's current paid-up equity capital of Rs. 39.85 cr. will stand enhanced to Rs. 42.31 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 846.29 cr. This valuation appears very much higher.

FINANCIAL PERFORMANCE:
On the financial performance front, as per exchange filings, CDL has (on a consolidated basis) posted a turnover/net profit of Rs. 0.25 cr. / Rs. 0.27 cr. (FY22), and Rs. 91.03 cr. / Rs. 6.08 cr. (FY23). With the help of exceptional items of Rs. 0.27 cr. it was able to show a profit for FY22. The sudden boost in its FY23 workings raises eyebrows. As per financial statements, other income of Rs. 4.27 cr. enable the company to post inflated profits. As per BSE exchange data, its P/E as of June 26, 2023, stood at 213 indicating manipulation in its trading price by vested interests to lure investors for RI.

But the prospectus has given FY23 financial data for 9M ended on December 31, 2022. As per this, its turnover was Rs. 71.80 cr. with a net profit of Rs. 4.17 cr. (including exceptional items of Rs. 1.33 cr.).

DIVIDEND POLICY:
The company has not declared any dividends so far. 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: 512379 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 30.52 on June 15, 2023, and opened on an ex-right basis at Rs. 29.80 on June 16, 2023. Since then, it has marked a high/low of Rs. 30.10 / Rs. 26.50. The scrip last closed at Rs. 28.66 as of June 26, 2023. For the last 52 weeks, it has posted a high/low of Rs. 41.41 / Rs. 17.00.

The promoters' holding has been constant at 0.08% for the last three quarters ended on March 31, 2023. The counter is well-managed above the RI price to lure investors.

Conclusion / Investment Strategy

The company is operating in a highly competitive segment of IT. Its IPO is priced exorbitantly and to lure investors, its market price too is manipulated and is currently quoting at a P/E of 213. Minuscule holding of promoters indicates some vested interest operations on the counter. Its offer document has few anomalies and transparency is missing. Thus it is a “High Risk/Low Return” bet. There is no harm in avoiding it.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on June 26, 2023

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: dilip_davda@rediffmail.com ).

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Cressanda Solutions Limited Review by Dilip Davda

The Cressanda Solutions Rights Issue 2023 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Cressanda Solutions Rights Issue 2023 worth investing. The Cressanda Solutions Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if Cressanda Solutions Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Cressanda Solutions Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.

Cressanda Solutions RI review (Avoid)

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