Mercury Metals RI review - (Avoid)

•    MML is planning EV segment business and has shown rosy prospects.
•    It has no matching financial performance to raise Rs. 48 cr. from markets.
•    Nearly Rs. 43 cr. is going towards clearance of unsecured loans.
•    The price is rigged to lure investors to this RI.
•    Investors may ignore this aggressively price RI which is raising equity by 23-fold. 

ABOUT COMPANY: 
Mercury Metals Ltd. (MML) though incorporated for metal business, changed its name to Mercury Capital Ltd. before rechristening itself as MML. Surprisingly, now it plans to pan out in Electric Vehicles (EVs). The company has started its Research and Development (R&D) Division for 3W, 4W and also for the 2W at Gujarat Industrial area, GIDC, Vadodara, Gujarat has an area of 45000 sq. ft. At this facility, the company has started the development of key components like the Chassis of the 2 Wheeler and 3 Wheeler. 

The company has received a certificate from International Centre for Automotive Technology (ICAT) for the 2W segment and also applied for the World Manufacturer Identifier (WMI) which is likely to be confirmed by mid of July 2022 for all its upcoming vehicles. Based on ICAT approval, the company has received the necessary assembly parts from China for 2-wheelers. The company has formed an in-house assembly line for the 2 & 3 wheeler products where production of 2W has been started with the brand name of "Thunderbolt EZ" and "Thunderbolt Smart". 

The company has now introduced these models in the market with 130 dealers network PAN India. The company is targeting 500 dealer network PAN India within the next 12 months period. The company has started manufacturing of Chassis for captive consumption as well as the company has received inquiries for the manufacturing of chassis for established companies like Hero, Lords Automotive Private Limited, Blix Electric Scooters, and Joy Bikes etc. The company has planned to manufacture 5000 chassis per month. The company is at an advanced stage to acquire an 80% stake in one of the companies which are having ICAT approval for the manufacturing of Motor Controller. The company will start the documentation and production very shortly.

MML has planned to manufacture 1,00,000 2W and 10,000 3W per year at the new location. As of June 23, 2022, it had 10 employees including Directors and 10 advisory members who look after our business operations, factory management administrative, secretarial, marketing and accounting functions in accordance with their respective designated goals. Future plans sound very rosy.

ISSUE DETAILS:
To part finance its needs for repayment of the unsecured loan (Rs. 20.00 cr.), adjustment of unsecured loan (Rs. 23.00 cr.), general corporate purposes (Rs. 4.66 cr.), MML is coming out with a right issue (RI) of 159914584 equity shares of Re. 1 each at a fixed price of Rs. 3.00 per share to mobilize Rs. 47.97 cr. Thus over 90% of fund mobilization is going towards the clearance of unsecured loans.

The company is issuing RI in the ratio of 23 shares against 1 share held by the eligible stakeholders as of the record date i.e. August 04, 2022. The issue opens for subscription on August 16, 2022, and will close on August 30, 2022. The full amount is payable on the application. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.31 cr. for this RI process. 

The issue is solely lead managed by Kunvarji Finstock Pvt. Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue.

Post RI, MML's current paid-up equity capital of Rs. 0.70 cr. will stand enhanced to Rs. 16.69 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 50.06 cr. A 23-fold jump in its paid-up capital raises major concern about servicing aspect. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, MML has posted turnover/net profits of Rs. 1.18 cr. / Rs. - (0.09) cr. (FY21), Rs. 1.22 cr. / Rs. 0.23 cr. (FY22). Thus the company that does not have matching financial performance wants to mobilize Rs. 48 cr. This raises eyebrows and concerns.

As per BSE filing data, the company has earned a net profit of Rs. 0.01 cr. on a turnover of Rs. 1.70 cr. for Q1 of FY23. 

DIVIDEND POLICY:
The company has not paid any dividend for the reported periods. 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: 531357:
The scrip last closed on cum-right basis at Rs. 9.10 on August 03, 2022, and opened on an ex-right basis at Rs. 3.42 on August 05, 2022. Since then it has marked a high/low of Rs. 3.76 / Rs. 3.42. The scrip last closed at Rs. 3.76 as of August 10, 2022. Based on this quote, its post-RI market cap stands at Rs. 62.74 cr. The scrip has posted the last 52 weeks high/low of Rs. 3.76 / Rs. 0.64 (post adjustment of Ex-RI impact). Promoters holding is around 65.10% for the last two quarters. The counter is being rigged by vested interest to lure investors to its aggressively priced RI.