Khfm Hospitality NSE SME RI review - (May apply)

•    The company is one of the reputed integrated business service providers with a Pan-India presence. 
•    It posted a severe setback for FY22. Now it is back on track from the current fiscal. 
•    Being an SME company, its market lot remains a major concern.
•    It has contracts worth Rs. 248 cr. on hand on a Pan-India basis. 
•    Well-informed investors may consider it for long-term rewards.

PREFACE:
The company came with its maiden IPO of 2950000 shares at a price of Rs. 36 per share to mobilize Rs. 10.62 cr. in March/April 2019. It was subscribed 1.34 times at that time. The issue was planned with a price of Rs. 38 per share to mobilize Rs. 11.21 cr. but due to poor response, it was extended with a reduction in its price to Rs. 36. The issue was lead managed by Bonanza Portfolio Ltd. Now it is coming out with a RI and the issue is self-managed.  

ABOUT COMPANY:
KHFM Hospitality and Facility Management Services Ltd. are one of the reputed integrated business services providers focused on providing integrated hospitality and facility management services (IHFM). It provides an entire range of hospitality and facility management services including mechanized housekeeping, guesthouse management, pest control, gardening and security service, etc. The IHFM segment of services provides integrated hospitality and facility management solutions to corporates including MNCs, government organizations like Railways, Municipal Corporations Public Sector Undertakings (PSUs) and other commercial establishments.

As on September 30, 2022, it had a healthy order book of approx. Rs. 248 cr. serving across 10 states in PAN India to various clients. KHFM's clients span various industries including the education sector, Municipal Corporations, Railway Stations, Amusement and Water Parks, Banks, airports, and Government Guest-houses, among others.

Headquartered in Mumbai, the company has a Pan-India presence across 10 states covering 21 cities through a network of site offices. As of September 30, 2022, it employed appx. 3,513 employees, including over 304 employees hired by the Company ('Core Employees') and over 3,209 employees hired on a contract basis ('Associate Employees'). The optimum combination of a human resource pool backed by integrity, KHFM provides a comprehensive array of Hospitality and Facilities Management to endow clients with an unmatched feeling of cleanliness and hygiene for a healthy Life. Keeping in trend with time and technology, the company proactively designs and implements training modules, to reinforce clients' trust. Over the last decade, its strength has grown in numbers as well as the widening spectrum of Hospitality and Facilities Management to an extent where KHFM has become an Integrated Facility Management Solution Provider.

With a proven track record and the demand from existing and new clients, KHFM is in a phase of natural progression and expansion phase in PAN India.

The company operates on an asset-light model with low capital expenditure requirements and high working capital requirements. Currently, the majority of revenues are from the deployment of personnel for soft services comprising housekeeping services, Facility Management and Hospitality Services, Guest House Management & Catering. 

ISSUE DETAILS:
The company is coming out with a rights issue (RI) of 10022299 equity shares of Rs. 10 each at a fixed price of Rs. 24 per share to mobilize Rs. 24.05 cr. The company is offering RI in the ratio of 1 lot for every 1 lot held (i.e. 3100 shares) to the eligible stakeholders as of the record date of February 10, 2023. The issue opens for subscription on February 27, 2023, and will close on March 10, 2023. The full amount is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on NSE SME Emerge. The company is spending Rs. 0.30 cr. for this RI process and from the net proceedings it will utilize Rs. 18.06 cr. for working capital and Rs. 5.69 cr. for general corporate purposes. 

The issue is self-managed by the company itself and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Post-RI, KHFM's current paid-up equity capital of Rs. 10.02 cr. will stand enhanced to Rs. 20.04 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 48.11 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, the company has posted a turnover/net profit- (loss) of Rs. 115.39 cr. / Rs. 3.26 cr. (FY21) and Rs. 97.05 cr. / Rs. - (19.21) cr. (FY22). For H1 of FY23 ended on September 30, 2022, on a consolidated basis, it earned a net profit of Rs. 1.62 cr. on a turnover of Rs.44.80 cr. As of September 30, 2022, its current paid-up equity capital of Rs. 10.02 cr. was supported by free reserves of Rs. 10.14 cr.
 
DIVIDEND POLICY:
The company paid a dividend of 5% for FY29 and 2.5% for FY20 and thereafter is skipped. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON NSE WEBSITE DATA: SCRIP CODE: KHFM (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 46.50 on February 09, 2023, and opened on an ex-right basis at Rs. 37.00 on February 10, 2023. Since then, it has marked a high/low of Rs. 38.55 / Rs. 33.40. The scrip last closed at Rs. 38.55 as of February 24, 2023. For the last 52 weeks, it has posted a high/low of Rs. 58.15 / Rs. 33.40. 

The promoters' holding has been constant at 71.20% for the last three quarters ended on Sept. 30, 2022. The counter is well managed above the RI issue price.