ABOUT COMPANY:
Kretto Syncon Ltd. (KSL) is in the business of Real Estate and Systems and Application Software. We are an integrated construction and real estate development company, focused primarily on construction and development of residential and commercial projects, in and around Ahmedabad, Gujarat. According to the management it has established a successful track record in the real estate industry in Ahmedabad, Gujarat by developing versatile projects through focus on innovative architecture, strong project execution and quality construction.
It is also engaged in the activity of developing, providing, undertaking, designing, import& export, distributing and dealing in Systems and application software for microprocessor based information systems, off shore software development projects, internet service provider, and solutions in all areas of application including those in Emerging niche segments like Internet. As of March 31, 2024, it had just 8 employees on its payroll.
The company has done all sort of gimmicks like alteration of object clauses, increase and decrease in its capital, shifting its registered office, change in the name of the company between 1995 to 2024.
ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 470394342 equity shares of Re. 1 each at par value to mobilize Rs. 47.04 cr. The RI opens for subscription on October 24, 2024, and will close on November 12, 2024. The company is offering RI in the ratio of 3 for 1 to its eligible stakeholders as of the record date of October 11, 2024.
The full amount is to be paid on application for number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.75 cr. for this RI process, and from the net proceeds, it will utilize Rs. 24.00 cr. for working capital, Rs. 15.00 cr. for acquisition of software, and Rs. 7.29 cr. for general corporate purposes.
The issue is self-managed by the company itself., and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue.
Post-RI, company’s current paid-up equity capital of Rs. 15.68 cr. will stand enhanced to Rs. 62.72 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 62.72 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last four fiscals, it has posted a total income/net profit of Rs. 0.65 cr. / Rs. 0.12 cr. (FY21), Rs. 4.15 cr. / Rs. 0.18 cr. (FY22), Rs. 0.63 cr. / Rs. 0.19 cr. (FY23), and Rs. 0.70 cr. / Rs. 0.25 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it earned a net profit of Rs. 0.68 cr. on a total income of Rs. 1.15 cr.This performance is really shocking with major upsets and appears to be the window dressing ahead of RI to lure investors. The minuscule earnings on the current equity base of Rs. 15+ cr. indicates servicing issue on post-RI increased equity of Rs. 62+ cr.
DIVIDEND POLICY:
The offer document is silent on its dividend policy. It will adopt a prudent dividend policy based on its financial performance and future prospects.
SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 531328 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 1.50 on October 10, 2024, and opened on an ex-right basis at Rs. 1.15 on October 11, 2024. Since then, it has marked high/low of Rs. 1.29 / Rs. 1.15. The scrip last closed at Rs. 1.31 as of October 23, 2024. For the last 52 weeks’ it has posted a high/low of Rs. 1.31 / Rs. 0.50. The counter is currently under ESM: stage 2.
The promoters’ holding has been constant at 0.00% for the last three quarters ended September 30, 2024. The counter is well managed above RI pricing by vested interest parties to tempt investors.
Review By Dilip Davda on October 24, 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.
