KCD Industries RI review - (Avoid)

•    KIIL is engaged in real estate-related activities. 
•    It has posted poor financial results and has done window dressing with other income.
•    The RI is exorbitantly priced compared to its financial data. 
•    Simply stay away from such fishy offers. 

ABOUT COMPANY:
KCD Industries India Ltd. (KIIL) was originally incorporated as Ruchika Electronics Ltd. in May 1985, and later on the name was changed to Ruchika Industries India Ltd. in November 2001, and subsequently, it was again changed to KCD Industries India Ltd. in October 2019. 

The company is engaged in the business of construction services. Its current concentration is on construction contracts from developers. However, the company may venture into the independent development of residential and commercial real estate projects. It will also focus on designing and developing products to address consumer needs at convenient locations and at affordable price points. 

As a civil contractor, it is engaged in the Development and Construction of Residential and Commercial Complex. As of the date of this RI LoO, it had 14 employees on its payroll. 

ISSUE DETAILS:
KIIL is coming out with a Rights Issue (RI) of 27142857 equity shares of Re. 1 each at a fixed price of Rs. 18 per share to mobilize Rs. 48.86 cr. The issue opens for subscription on May 31, 2023, and will close on June 14, 2023. To lure investors, the company is asking for just 25% money (i.e. Rs. 4.50 per share) on the application and the rest in subsequent calls as determined by the company. It is offering RI in the ratio of 19 shares for every 7 shares held to eligible stakeholders as of the record date of May 19, 2023. Post allotment, shares will be listed on BSE. 

KIIL is spending Rs. 0.26 cr. for this RI process and from the net proceeds, it will use Rs. 39.00 cr. for working capital and Rs. 9.60 cr. for general corporate purposes. 

This RI is self-managed by the company itself and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. Swaraj Shares and Securities Pvt. Ltd. is the advisor to the issue. 

Post-RI, KIIL's current paid-up equity capital of Rs. 1.00 cr. will stand enhanced to Rs. 3.71 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 66.86 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, KILL has posted a turnover/net profit - (loss) of Rs. 0.12 cr. / Rs. - (0.07) cr. (FY21), and Rs.  - (0.06) cr. / Rs. 0.19 cr. (FY22). Thanks to other income of Rs. 0.66 cr. reported for FY22 that helped it to post some profits. For 9M of FY23 ended on December 31, 2022, it earned a net profit of Rs. 0.97 cr. on a turnover of Rs. 1.43 cr. Thus its financial data is raising eyebrows and concern over the sustainability of margins reported. 

DIVIDEND POLICY:
The offer document is silent on KIIL's dividend policy. 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: 540696 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 26.28 on May 18, 2023, and opened on an ex-right basis at Rs. 21.25 on May 19, 2023. Since then, it has marked a high/low of Rs. 22.83 / Rs. 20. The scrip last closed at Rs. 22.83 as of May 26, 2023. For the last 52 weeks, it has posted a high/low of Rs. 23.97 / Rs. 5.68. The shareholding pattern details are not available on BSE Website. 

The counter is well managed above the par value to lure investors. The counter is well operated by vested interests above the RI pricing to tempt investors. 

The counter is currently under ASM ST: Stage 1.