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Markolines Pavement RI review (Avoid)

Markolines Pavement Technologies Limited Logo

•    MPTL is the Highway Operations and Maintenance related service provider. 
•    It has posted growth in its financial performance for the reported periods. 
•    The counter is quoting below the RI price on BSE and raises eyebrows.
•    There is no harm in skipping this pricey RI as it's a high-risk/low-return bet. 


PREFACE:
MPTL is listed on BSE SME since September 27, 2021, and at that time it was known as Markolines Traffic Controls Ltd. It came with an IPO of Rs. 40 cr. at a fixed price of Rs. 78 per share and was subscribed by 2.18 times. Now with the changed name it is coming with a RI to mobilize Rs. 49.86 cr. and has priced it very aggressively. 

ABOUT COMPANY:
Markolines Pavement Technologies Ltd. (MPTL) - formerly known as Markolines Traffic Controls Ltd. - is a Highway Operations & Maintenance (O&M) Service providing company. It thrives to make Highway Operations & Maintenance cost-effective and easier with the help of Innovation, Technology & out-of-the-box solutions. MPTL's vast experience of 19 years in offering superior services in Highway Operations & Maintenance (O&M) has earned its name in the (O&M) domain. 

The company's principal business operations are broadly divided into three categories: - Highway Operations under which it provides services like Toll operations, Route Patrolling, and Incident management; - Highway Maintenance under which it provides services like Routine Maintenance, Preventive Maintenance, and Major Maintenance & Repairs (MMR); and - Specialized Maintenance Services under which it provides services which enhance the life and quality of the road, these are Micro-surfacing (MS), Base / Sub-base Stabilization (FDR), and Cold In-Place Recycling (CIPR).  According to the management, today MPTL is one of the trusted service providers in the Highway O&M sector operating Pan India basis under the Markolines Umbrella. As of September 30, 2022, it had 1453 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a rights issue (RI) of 2985550 equity shares of Rs. 10 each at a fixed price of Rs. 167 per share to mobilize Rs. 49.86 cr. It is offering 5 shares for every 32 shares held by the stakeholders as of the record date of January 17, 2023. The issue opens for subscription on January 27, 2023, and will close on February 09, 2023. The full amount is to be paid on the application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 4.30 cr. for this RI process (including Rs. 4 cr. for marketing expenses ???), and from the net proceeds, it will use Rs. 34.25 cr. for the working capital, and Rs. 11.31 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, MPTL's current paid-up equity capital of Rs. 19.11 cr. will stand enhanced to Rs. 22.09 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 368.95 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, MPTL has posted a turnover/net profit of Rs. 157.97 cr. / Rs. 4.02 cr. (FY21) and Rs. 186.90 cr. / Rs. 10.11 cr. (FY22). For H1 of FY23, it earned a net profit of Rs. 6.68 cr. on a turnover of Rs.152.38 cr. 

Its current holding levels of Inventories (29 days), Trade Receivables (114 days), and Trade payables (128 days) are assumed to come down to 15 days, 93 days, and 42 days respectively, but its receivable and payable levels raise major concern. 

DIVIDEND POLICY:
The company has announced a dividend of 5% for FY22. Post listing of RI shares, it will adopt a prudent dividend policy based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 543364 (FV Rs. 10).
The scrip last closed on the cum-right basis at Rs. 152.55 as of January 16, 2023, and it opened on an ex-right basis at Rs. 145.00 on January 17, 2023. Since then, it has marked a high/low of Rs. 163.90 / Rs. 137.00. It last closed at Rs. 153.05 as of January 24, 2023. For the last 52 weeks, it has posted a high/low of Rs. 207.00 / Rs. 59.35. The counter is having below RI price quotes since January 13, 2023, and raised eyebrows.  

The promoter's holding has come down a bit to 72.58% (Dec. 22) from 73.16% (June 22). 


Conclusion / Investment Strategy

Though the company has marked growth in its top and bottom lines for the reported periods, its RI pricing above the current market quotes raises concern. This is despite above 72% promoter’s holding and hence appears something fishy. There is no harm in skipping this costly bet.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jan 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 Markolines Pavement Technologies Limited RI Views / Analysis / Recommendations ...

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


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