Indian Infotech RI (BSE) review - (Avoid)

•    The company's name does not indicate its current business operations.
•    It has posted erratic and listless financial performance so far. 
•    Post-RI its equity will be Rs. 126.7 cr. that may raise its servicing issue. 
•    Promoter's holding of 7.04% poses concern.
•    There is no harm in skipping this "High Risk/No Return" bet.

ABOUT COMPANY:
Indian Infotech and Software Ltd. (IISL) is a non-banking finance company ("NBFC") incorporated in the year 1982 registered with the Reserve Bank of India bearing registration number B-13.0022 to carry on NBFC business activities under Section 45IA of the Reserve Bank of India Act, 1934. It is a Non-systemically important non-deposit taking company with over two decades of lending experience in rural and semi-urban geographies in India. The company is primarily engaged in micro centric lending solutions to look after the needs and aspirations of customers. Its portfolio includes Vehicle Finance and Business Finance Products to small business owners. 

It has long history of serving all types of markets with high growth potential and have maintained a track record of financial performance and operational efficiency through consistently high rates of customer acquisition and retention and low cost expansion into underpenetrated areas. Therefore, IISL strategically focuses on clients in the rural and semi urban sector.

It carries out operations in the format of "hub & spoke" business model. The company conducts retail operations through registered office located at Mumbai. In small business finance and vehicle finance businesses, its branches digital presence/ act as the primary point of sale and assist with the origination of loans, various collection processes and enhancing customer service, while its central support office provides support functions, such as loan processing and credit monitoring. As of September 30, 2023, it had 15 employees on its payroll. It is highly surprising that its name does not match with the business it does. 

ISSUE DETAILS:
The company is coming out with Rights Issue (RI) of 261453270 shares of Re. 1 each at a fixed price of Rs. 1.60 per share to mobilize Rs. 41.83. The issue opens for subscription on February 06, 2024, and will close on February 13, 2024. The company is offering RI in the ratio of 13 for 50 to eligible stakeholders as of the record date of January 29, 2024. Full money 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. 0.30 cr. for this RI process and from the net proceeds, it will utilize Rs. 35.00 cr. for working capital, and Rs. 653 cr. for general corporate purposes. 

The issue is self-managed by the company and Purva Sharegistry (India) Pvt. Ltd. is the registrar of the issue. While Link Intime India Pvt. Ltd. is the RTA for the company. 

Post-RI, company's current paid-up equity capital of Rs. 100.56 cr. will stand enhanced to Rs. 126.70 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 202.73 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company reported a total income/net profit of Rs. 55.39 cr. / Rs. 00.32 cr. (FY22), and Rs. 47.06 cr. / Rs. 0.61 cr. (FAY23). For H1 of FY24 it earned a net profit of Rs. 7.21 cr. on a total income of Rs. 10.95 cr. Thus its financial performance has been inconsistent with surprisingly rising bottom lines. There appears to be some window dressing to lure investors for subscribing RI. Looking at negligible profits, it may face servicing issue as its equity will be above Rs. 126 cr. post RI. 

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. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 509051 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 2.88 on January 25, 2024, and opened on an ex-right basis at Rs. 2.55 on January 29, 2024. Since then, it has marked a high/low of Rs. 2.97 / Rs. 2.55. The scrip last closed at Rs. 2.64 as of February 02, 2024. For the last 52 weeks' it has posted a high/low of Rs. 2.97 / Rs. 1.05. 

The promoters' holding has declined from 11.86% as of June 30, 2023 to 7.04% as of December 31, 2023. The counter is well managed above the RI value by vested interest parties to lure investors for investment.