• The company is engaged in making injection moulds and moulded components to automotive and consumer product manufacturers.
• It marked minuscule financial performance and incurred losses for the last 21 months working.
• Though the RI is at a hefty discount of around 54% based on its last traded price, it's a "High Risk/Low Return" bet.
• Well-informed investors may take a risk of parking funds for the medium to long term rewards.
ABOUT COMPANY:
Iykot Hitech Toolroom Ltd. (IHTL) - erstwhile known as Elcot Hitech Toolroom Ltd., is one of the leading designers and manufacturers of injection moulds in India. It also supplies injection moulded components for a variety of industries including automotive and consumer products. It has successfully designed and manufactured multi-cavity high precision injection moulds for use in machines of size up to 1500 tons. The company has installed high precision CNC Milling Machines and Spark Erosion machines to manufacture moulds up to 8 tons. Its Injection Moulding facility has one of the highest range of machines from 220 Tons to 1500 Tons.
The Company was referred to the BIFR vide reference no. 439/2002 and the BIFR vide Order dated January 08, 2007 while discharging the Company as a Sick Industrial reduced the face value of the shares of the Company to Rs. 6 per share. The Shareholders of the Company thereafter vide special resolution reduced the face value of the shares of the Company to ₹5 per share on September 26, 2007.
Post change in the management, the company decided to launch the products under its own kitchen appliances and home appliances like tower fan, induction stove, mixer grinder etc. The name of the brand that has been chosen is Zada Star which is currently registered and owned by the new promoters. The company also sells the outsourced products under its brand and intends to expand its product portfolio in the near future. As of the date of this offer document, it had 21 employees on its payroll.
ISSUE DETAILS:
The company is coming out with a Right Issue (RI) of 14196000 equity shares of Rs. 5 each at a fixed price of Rs. 7 per share to mobilize Rs. 9.94 cr. The RI opens for subscription on April 24, 2024, and will close on May 08, 2024. The company is offering RI in the ratio of 7 for3 to its eligible stakeholders as of the record date of April 03, 2024. The company is asking for Rs. 1.75 per share on application for the number of shares applied and the balance Rs. 5.25 per share in first and final call as decided by the company. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.50 cr. for this RI process, and from the net proceeds, it will utilize Rs. 7.00 cr. for working capital, and Rs. 2.44 cr. for general corporate purposes.
The issue is self-managed by the company itself and Cameo Corporate Services Ltd. is the registrar to the issue.
Post-RI, company's current paid-up equity capital of Rs. 3.04 cr. will stand enhanced to Rs. 10.14 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 14.20 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last four fiscals, the company has posted a total income/net profit/- (loss) of Rs. 7.21 cr. / Rs. - (0.10) cr. (FY20), Rs. 6.31 cr. / Rs. 0.02 cr. (FY21), Rs. 8.41 cr. / Rs. 0.18 cr. (FY22), and Rs. 2.35 cr. / Rs. - (1.13) cr. (FY23). For 9M of FY24 ended on December 31, 2023, it marked a loss of Rs. - (1.21) cr. on a total income of Rs. 1.35 cr. Thus the company had minuscule operations with last 21 months working with losses.
DIVIDEND POLICY:
The company has not declared any dividends for the last five fiscals. 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: 522245 (FV Rs. 5).
The scrip last closed on cum-right basis at Rs. 37.34 on April 02, 2024, and opened on an ex-right basis at Rs. 16.00 on April 03, 2024. Since then, it has marked a high/low of Rs. 17.72 / Rs. 15.20. The scrip last closed at Rs. 15.20 as of April 22, 2024. For the last 52 weeks' it has posted a high/low of Rs. 17.72 / Rs. 6.98. The counter is currently under GSM: Stage 3.
The promoters' holding has been constant around 57.54% for the last three quarters ended with March 31, 2024. The counter is well managed above the RI price to tempt investors.
Review By Dilip Davda on April 22, 2024
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
