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KCL Infra RI review (May apply)

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•    The company is engaged in infrastructure-related development and construction activities. 
•    Based on its current equity base, it has posted an average performance. 
•    Post-RI its equity stands enhanced by over 9 times and raises servicing concerns.
•    Low promoters' holding is worrisome. 
•    Risk aver/cash surplus investors may consider investing in it. 

ABOUT COMPANY:
KCL Infra Projects Ltd. (KCLIPL) - earlier known as Kadamb Constructions Ltd. is an innovative infrastructure company focused on development & growth. It is engaged in the development of engineering and construction and strives to provide quality work economically. The company's projects include all infrastructure works e.g. civil engineering, road construction, and high-rise buildings for both commercial and residential usage. 

It is a well-known entity in road construction, canal, dam and many other works in the construction and development of infra projects. The Company has been committed to providing a better living experience to its customers through constant innovation. Most of these initiatives have been taken beyond its regular line of business. It has been focused on providing the most ethical and performance-based financial services since its inception. 

ISSUE DETAILS:
To part finance its need for working capital (Rs. 35.00 cr.) and general corporate purposes (Rs. 11.40 cr.), the company is offering a rights issue (RI) of 236979000 equity shares of Rs. 2 each at par to mobilize Rs. 47.40 cr. It is issuing 9 shares against 1 share held by the eligible stakeholders as of the record date of August 05, 2022. The issue opens for subscription on August 22, 2022, and will close on September 05, 2022. KCLIPL is calling for Rs. 0.50 per share on the application and the balance by subsequent calls from time to time. Post allotment, shares will be listed on BSE. The company is spending Rs. 1.00 cr. for this RI process. 

This RI is solely lead managed by Capitalsquare Advisors Pvt. Ltd. and Adroit Corporate Services Pvt. Ltd. is the registrar to the issue. 

Post RI, the company's current paid-up equity capital of Rs. 5.27 cr. will stand enhanced to Rs. 52.66 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 52.66 cr.). Thus its equity multiplies 9 fold and raises concern over its servicing. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted turnover/net profits of Rs. 5.12 cr. / Rs. 0.10 cr. (FY21) and Rs. 16.31 cr. / Rs. 0.48 cr. (FY22). 

As per the BSE filing, as per the unaudited results, for the Q1 of FY23, it earned a net profit of Rs. 0.17 cr. on a turnover of Rs. 1.94 cr. While its earnings so far on the current paid-up capital appear average, a quantum jump in its equity base will raise concern over servicing part. Currently, the company has less than 20 employees. 


DIVIDEND POLICY:
The offer documents are silent on its dividend policy. It will adopt a prudent dividend policy post listing of RI, based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 531784:
The scrip last closed on cum-right basis at Rs. 4.43 on August 04, 2022, and opened on an ex-right basis at Rs. 2.13 on August 05, 2022. Since then it has marked a high/low of Rs. 2.97 / Rs. 2.13. The scrip last closed at Rs. 2.68 as of August 18, 2022. Based on this quote, its post-RI market cap stands at Rs. 70.57 cr. 

The scrip has posted the last 52 weeks high/low of Rs. 2.97 / Rs. 0.81 (post adjustment of Ex-RI impact). Promoters' holding is 23.20% over the last three quarters. The counter is well managed by vested interests to lure investors for this at par RI. Currently, the counter is under ASM ST - Stage 1. 


Conclusion / Investment Strategy

The company has posted an average financial performance so far. KCLIPL’s paid-up equity capital rises by 9 times and raises concern for its servicing. Promoter’s low stake is also a worry. It appears the counter is rigged above the offer price to lure investors to the RI subscription. Risk seeker/cash surplus investors may consider an investment with a long-term perspective.

Review By Dilip Davda on Aug 18, 2022

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 information published here. Any reader taking decisions based on any information published here does so entirely at its 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.

(SEBI registered Research Analyst-Mumbai).


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.

Email: dilip_davda@rediffmail.com

More KCL Infra Projects Limited RI Views / Analysis / Recommendations ...

The KCL Infra Projects Rights Issue 2022 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 KCL Infra Projects Rights Issue 2022 worth investing. The KCL Infra Projects Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if KCL Infra Projects Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in KCL Infra Projects Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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