Interactive Fin RI review - (Avoid)

•    The company is a SEBI registered Category-1 merchant banker providing all related services for the primary/capital markets.
•    It marked minuscule financial performance till FY24.
•    The sudden boost in its top and bottom lines in pre-RI period raises eyebrows and concern over its sustainability.
•    With this offer, the company is planning to increase its Networth, which is highly surprising.
•    There is no harm in skipping this “High Risk/No Return” pricey bet.

ABOUT COMPANY:
Interactive Financial Services Ltd. (IFSL) is engaged in the business of Investment Banking and Financial activities. For the Investment banking activity, it is registered with SEBI having Registration No. INM000012856 dated September 27, 2021 as Category-I Merchant Banker. The company provides services in various areas of capital markets which include Merchant Banking Services, and Corporate Advisory Services under one roof and well diversified for financial and advisory services in the areas of Capital Markets, Corporate Restructuring, Valuations and other Merchant Banking Services. 

It is actively working in Main Board IPOs, SME IPOs, FPOs, valuation of companies for various transactions, migration to main board, takeovers, buy back and business advisory. In this segment, it is primarily focused on providing Merchant Banking services to Small and Medium Enterprises (SMEs). As of March 31, 2024, it had 19 employees on its payroll.

ISSUE DETAILS:
The company is coming out with Rights Issue (RI) of 3917030 equity shares of Rs. 10 each at a fixed price of Rs. 30 per shares to mobilize Rs. 11.75 cr. The RI is opening for subscription on January 27, 2025, and will close on February 05, 2025. The company is offering RI in the ratio of 13 for 10 to its eligible stakeholders as of the record date of January 17, 2025. The full amount it 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. 3.05 cr. for setting up a new office space, Rs. 5.95 cr. for increasing Networth of the company, and Rs. 2.50 cr. for general corporate purposes. The surprising aspect here is the funding being raised to the tune of Rs. 5.95 cr. for increasing its Networth, which we are coming across for the first time.

The RI is self-managed by the company, and Bigshare Services Pvt. Ltd. is the registrar to the issue. While Satellite Corporate Services Pvt. Ltd. is the registrar to the company.

Post-RI, company’s current paid-up equity capital of Rs. 3.01 cr. will stand enhanced to Rs. 6.93 cr. (Based on the RI pricing, the company is looking for a market cap of Rs. 20.79 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted minuscule numbers for its total income/net profit of Rs. 2.78 cr. / Rs. 1.20 cr. (FY23), and Rs. 3.48 cr. / Rs. 0.61 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 2.89 cr. on a total income of Rs. 5.77 cr. The sudden boost in its top and bottom lines in Pre-RI period raise eyebrows and concern over its sustainability.

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. However, its offer document is silent on its dividend policy.

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 539692 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 44.27 on January 16, 2025, and opened on an ex-right basis at Rs. 34.40 on January 17, 2025. Since then, it has marked a high/low of Rs. 35.88 / Rs. 29.91. The scrip last closed at Rs. 30.55 as of January 24, 2025. For the last 52 weeks’ it has posted a high/low of Rs. 49.54 / Rs. 15.48. 

The promoters’ holding has been constant at NIL% for the last three quarters ended with December 31, 2024. The counter is well maintained above the RI price to tempt investors.