Debock Ind RI review - (Avoid)

•    DIL came with its maiden IPO in Sept. 2018 for Rs. 4.44 cr. and now planning to raise Rs.49.14 cr. by way of RI.
•    Its offer documents have many garbles on financial data. 
•    It is operating in a highly competitive and fragmented segment.
•    Financial data appears to have been window dressed with adjustments in its trade receivables and inventories. 
•    There is no harm in skipping this "High Risk/Low Return" dicey bet. 

PREFACE:
The company went public in May 2018 to mobilize Rs. 4.44 cr. at a price of Rs. 20 per share and is now planning to raise Rs. 49.14 cr. at a price of Rs. 15 per share by way of a Rights Issue. Gretex Corp had a mandate for its maiden IPO, but this time the RI is managed by the company itself. 

ABOUT COMPANY:
Debock Industries Ltd. (DIL) - erstwhile known as Debock Sales and Marketing Ltd. is engaged in the business of manufacturing agricultural equipment. It is a manufacturer and supplier of a range of agricultural equipment mainly Tractor Trolley, Agricultural Thresher, Mould Board Ploughs, Mounted Disc Ploughs, Tillers, Tanker, Combine Machine, Seed Drill Machine, Mounted Disc Harrows, Tractor Cultivators, Chaff Cutters etc. Its manufacturing facilities are located at Panwad Mod, NH-12, Gopipura Post, Deoli, Tonk Rajasthan. 

The company also ventured into the hospitality services industry in July 2015 by building two hotels (a) Hotel Debock Inn, situated at Deoli in Tonk District of Rajasthan and (b) Debock Resort in April 2016 on NH 12 (Kota - Jaipur). Subsequently, it leased hotel assets typically for a period ranging from 5 to 10 years. As of December 31, 2022, it had 10 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 32760000 equity shares of Rs. 10 each at a fixed price of Rs. 15 per share to mobilize Rs. 49.14 cr. Thus within five and half years, it is daring to raise over 11 times its maiden IPO. The issue opens for subscription on June 13, 2023, and will close on June 27, 2023. The company is offering RI in the ratio of 3 shares for every 7 shares held to eligible stakeholders as of the record date of June 01, 2023. The full amount is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on NSE. DIL is spending Rs. 0.22 cr. for this RI process and from the net proceeds, it will utilize Rs. 38.00 cr. for working capital and Rs. 10.92 cr. for general corporate purposes. 

This RI is self-managed by the company itself and Cameo Corporate Services Ltd. is the registrar of the issue. 

DIL's current paid-up capital of Rs. 76.44 cr. will stand enhanced to Rs. 109.20 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 163.80 cr. Spurt in its post-RI equity capital may face servicing issues. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, DIL has posted a turnover/net profit of Rs. 18.70 cr. / Rs. 0.79 cr. (FY20), Rs.30.78 cr. / Rs. 2.12 cr. (FY21), and Rs. 97.41 cr. / Rs. 6.73 cr. (FY22). For 9M of FY23 ended on December 31, 2022, it earned a net profit of Rs. 23.54 cr. on a turnover of Rs. 129.20 cr. The spurt in the bottom line appears to be window dressed with adjustments in trade receivables and inventories. The offer document has so much garble in financial data. 

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON NSE WEBSITE DATA: SCRIP CODE: DIL (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 17.20 on May 31, 2023, and opened on an ex-right basis at Rs. 16.70 on June 01, 2023. Since then, it has marked a high/low of Rs. 17.20 / Rs. 15.65. The scrip last closed at Rs. 16.00 as of June 09, 2023. For the last 52 weeks, it has posted a high/low of Rs. 31.50 / Rs. 9.90. The promoters' holding has been constant at 36.66% for the last three quarters ended on March 31, 2023. The counter is well managed above/around the RI value to lure investors.