Khfm Hospitality NSE SME RI review (May apply)

Khfm Hospitality And Facility Management Services Limited Logo

•    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.

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.  

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. 

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. 

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.
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. 

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.

Conclusion / Investment Strategy

Though the company posted a setback for FY22, it has been gaining ground and has contracts worth Rs. 248 cr. on hand. This segment is highly competitive and fragmented with many small players. However, considering a discount of around 37.74% based on its last traded price of Rs. 38.55 for this RI offer well-informed investors may consider it for long-term rewards.

Review By Dilip Davda on Feb 24, 2023

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. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda

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 Khfm Hospitality And Facility Management Services Limited RI Views / Analysis / Recommendations ...

The Khfm Hospitality Rights Issue 2023 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 Khfm Hospitality Rights Issue 2023 worth investing. The Khfm Hospitality Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if Khfm Hospitality Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Khfm Hospitality Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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