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Franklin Ind. RI (BSE) review (Avoid)

Franklin Industries Ltd Logo

•    The company that was primarily engaged in the trading of gold and silver jewellery has not shifted its focus on trading in agri products.
•    It marked average performance till FY23 and posted bumper top and bottom line for 9M of FY24.
•    Four-fold rise in its post-RI equity may pose servicing issues. 
•    The counter is well operated by vested interests to tempt investors at large. 
•    There is no harm in skipping this "High Risk/Low Return" bet. 

Franklin Industries Ltd. (FIL) is engaged in the business of trading of agricultural commodities such as wheat, rice, maize, vegetables including capsicum, tomato etc., Fruits including Mango, Watermelon, Grapes and other agricultural products. The company is also engaged in contract manufacturing for agricultural products such as Cucumber, Onion and Castor.

The company sources the agricultural products from the manufacturers by paying an advance payment or as per agreed terms and then these products are sold to its network of distributors. Owing to presence in the market, it has built strong relationships with both the farmers as well as with the wholesaler/retailers' community in contract manufacturing, the company leases an agricultural land on lease and cultivate Cucumber, Onion and Castor for meeting the demand in the market. 

This gives the company control over the entire process and getting the agricultural produces at better rates as compared to the market. A part of the yield is shared with the farmers working on contractual basis on the leased land, which further helps the local farmers' community. Company has discontinued the Jewellery Business Last year i.e. Trading of Gold and Silver Jewellery. As of the date of this offer document, it had just 7 employees on its payroll. 

The company is coming out with its Rights Issue (RI) of 108450000 equity share of Re. 1 at a fixed price of Rs. 3.58 per share to mobilize Rs. 38383 cr. The issue opens for subscription on May 24, 2024, and will close on June 11, 2024. The company is offering RI in the ratio of 3 for 1 to its eligible stakeholders as of the record date of May 13, 2024. 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. 0.25 cr. for this RI process, and from the net proceeds, it will utilize Rs. 29.26 cr. for working capital, and Rs. 9.32 cr. for general corporate purposes. 

The RI is self-managed by the company itself, and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 3.62 cr. will stand enhanced to Rs. 14.46 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 51.77 cr. 

On the financial performance front, for the last two fiscals, the company has posted a total revenue/net profit of Rs. 17.08 cr. / Rs. 0.70 cr. (FY22), and Rs. 20.52 cr. / Rs. 0.21 cr. (FY23). For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 4.80 cr. on a total revenue of Rs. 32.60 cr. Thus it marked boosted top and bottom lines for 9M of FY24, that raise eyebrows. 

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 scrip last closed on cum-right basis at Rs. 7.81 on May 10, 2024, and opened on an ex-right basis at Rs. 4.87 on May 13, 2024. Since then, it has marked a high/low of Rs. 6.49 / Rs. 4.87. The scrip last closed at Rs. 6.49 as of May 21, 2024. For the last 52 weeks' it has posted a high/low of Rs. 6.49 / Rs. 0.70. The counter is currently under ESM: Stage-1.

The promoters' holding has been constant at NIL% for the last three quarters ended with March 31, 2024. The counter is well managed above the RI price to tempt investors at large with good market operation by vested interests. 

Conclusion / Investment Strategy

The company has been posting below average financial performance. The sudden boost posted in top and bottom lines for 9M of FY24 raise eyebrows. Its paid-up equity will rise four times post RI, that may face servicing issues. There is no promoter’s holding, thus the counter is well operated by vested interest to lure investors at large for this pricey RI. Though its offer price appears tempting considering its last traded price, there is no harm in skipping this “High Risk/Low Return” bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 21, 2024

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, a freelance journalist

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: ).

More Franklin Industries Ltd RI Views / Analysis / Recommendations ...

The Franklin Industries Rights Issue 2024 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 Franklin Industries Rights Issue 2024 worth investing. The Franklin Industries Rights Issue 2024 Note sets the Rights Issue expectations in systematic way which tells you if Franklin Industries Rights Issue 2024 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Franklin Industries Rights Issue 2024 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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