Nakoda Group RI - Sept 23 review - (May apply)

•    NGIL is engaged in ready-to-eat processed products. 
•    It has posted an average financial performance for the last two fiscals. 
•    FY23 marked a decline in its top and bottom lines, which raises concern. 
•    Well-informed investors may park funds for medium to long-term rewards. 

PREFACE:
The company came with its maiden IPO in May 2018 to mobilize Rs. 6.48 cr. at a price of Rs. 35 per share. It has not marked any noteworthy performance but maintained its counters at a high level with market operations by vested interests. Now it is coming out with an RI to mobilize Rs. 6.36 cr. at Rs. 40 per share. 

ABOUT COMPANY:
Nakoda Group of Industries Ltd. (NGIL) is engaged in the manufacturing of Tutti fruity (Diced Chelory) also called "Papaya Preserve" and canned and Dehydrated fruit cubes which come under the category of bakery products. The company is also engaged in processing Dry Fruits and Nuts which are imported from California and other Middle east countries by the traders in Maharashtra. 

NGIL is also engaged in trading of sesame seeds, clove, cut peel murabba, karonda, rice, various seeds, and toor daal. As of March 2023, its revenue from Dry Fruits processing consists of 45.51%, manufacturing of Tutti fruity consists of 26.04%, and trading consists of 28.45%. Out of the total revenue generated from manufacturing of Tutti Fruity, 50.19% of revenue is generated from Exporting to Malaysia, Dubai, Saudi Arabia, Chili, Egypt, Qatar, and Singapore, and 49.81% is from domestic sales.

The offer document is silent on its human resources data, which raises a concern about non-transparency.

ISSUE DETAILS:
The company is offering Rights Issue (RI) of 1590642 equity shares of Rs. 10 each at a fixed price of Rs. 40 per share to mobilize Rs. 6.36 cr. The issue has already opened for subscription on September 18, 2023, and will close on September 27, 2023. The company is offering RI in the ratio of 1 share for every 7 shares held to eligible stakeholders as of the record date of September 05, 2023. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 0.35 cr. for this RI process and from the net proceeds, it will utilize Rs. 5.00 cr. for working capital and Rs. 1.01 cr. for general corporate purposes. 

Navigant Corporate Advisors Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Post-RI, NGIL's current paid-up equity capital of Rs. 11.14 cr. will stand enhanced to Rs. 12.73 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 50.90 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, NGIL has posted a total income/net profit of Rs. 59.98 cr. / Rs. 1.70 cr. (FY22), and Rs. 54.67 cr. / Rs. 0.91 cr. (FY23).  It has posted a decline in its top and bottom lines for FY23 which raises concern. For Q1 of FY24, it earned a net profit of Rs. 0.16 cr. on a total income of Rs. 9.29 cr. As of June 30, 2023, its current paid-up equity capital of Rs. 11.14 cr. is supported by free reserves of Rs. 5.74 cr. 

DIVIDEND POLICY:
The offer document is silent on the dividend policy. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. However, as per the BSE Website, it paid a dividend of 1% for FY21, 1.5% for FY22, and FY23. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 541418 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 48.72 on September 04, 2023, and opened on an ex-right basis at Rs. 48.95 on September 05, 2023. Since then, it has marked a high/low of Rs. 48.95 / Rs. 42.62. The scrip last closed at Rs. 45.00 as of September 20, 2023. For the last 52 weeks, it has posted a high/low of Rs. 150.07 / Rs. 41.66. 

The promoters' holding has declined to 65.82% for the quarter ended June 30, 2023, from 67.85% for the quarter ended March 31, 2023, as well as for December 31, 2022.  The counter is well managed above the par value to lure investors. The counter is under ESM - Stage I.