Nakoda Group RI June 24 - review - (May apply)

•    This is the 3rd RI from the company since April 2022.
•    It is engaged in manufacturing and marketing of bakery products.
•    It marked loss for FY24 on declined topline that raises concern.
•    Though the RI is at a discount of around 47% based on its last traded price, losses for FY24 raise concern.
•    Well-informed/cash surplus investors may park moderate funds for the long term. 

PREFACE:
This is the 3rd RI from the company since September 2023. The first RI was in the ratio of 1 for 4 at a price of Rs. 120 per share in April 2022 for mobilizing Rs. 33.40 cr. and mandate was with Shreni Shares Ltd.; 2nd RI was in September 2023 in the ratio of 1 for 7 at Rs. 40 to mobilize Rs. 6.36 cr. with Navigant Corporate Advisors as advisor to the issue, and now it is coming out with its 3rd RI in the ratio of 4 for 10 at a price of Rs. 25 per share to mobilize Rs. 12.73 cr. with Navigant Corporate Advisors as the advisor to the issue. Thus it issued all the three RIs with declined prices. 

ABOUT COMPANY:
Nakoda Group of Industries Ltd. (NGIL) is engaged in manufacturing of Tutti fruity (Diced Chelory) also called as "Papaya Preserve" and canned & Dehydrated fruit cubes which comes under the category of bakery products. It is also engaged in processing of Dry Fruits & Nuts which are imported from California and other Middle east countries by the traders in Maharashtra. The company is also engaged in trading of sesame seeds, clove, cut peel murabba, karonda, rice, various seeds and toor daal. As of March 2024, its revenue from Dry Fruits processing consists of 59.03%, manufacturing of Tutti fruity consists of 31.61% and from trading consist of 9.35%. Out of the total revenue generated from manufacturing of Tutti Fruity, 48.97% revenue is generated from Exporting to Malaysia, Dubai, Saudi Arab, Chili, Egypt, Qatar, Singapore, and 51.02% is from the domestic sale. The offer document is silent on its employees' strength. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 5090056 equity shares of Rs. 10 each at a fixed price of Rs. 25 per share to mobilize Rs. 12.73 cr. The RI opens for subscription on June 13, 2024, and will close on June 28, 2024. The company is offering RI in the ratio of 4 for 10 to its eligible stakeholders as of the record date of May 30, 2024. The company is asking for 25% (i.e. Rs. 6.25) payment per share on the number of shares applied, and the balance in one or more calls as determined by the company from time to time. Post-RI allotment, the shares will be listed on BSE and NSE. The company is spending Rs. 0.95 cr. for this RI process and from the net proceeds, it will utilize Rs. 6.00 cr. for working capital, Rs. 3.25 cr. for repayment/prepayment of certain borrowings, and Rs. 2.53 cr. for general corporate purposes. 

The RI is self-managed by the company and Bigshare Services Pvt. Ltd. is the registrar to the issue. Navigant Corporate Advisors Ltd. is the advisor to the issue. 

Post-RI, company's current paid-up capital of Rs. 12.73 cr. will stand enhanced to Rs. 17.82 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 44.54 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit/ - (loss) of Rs. 54.67 cr. / Rs. 0.91 cr. (FY23), and Rs. 47.13 cr. / Rs. - (2.12) cr. The company has posted huge loss for the concluded fiscal, that raise concern. 

DIVIDEND POLICY:
The offer document is silent on company's dividend policy. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. As per exchange filings, the company paid a token dividend of 1.5% in September 2023, September 2022, and 1% in September 2021. 

SCRIP PERFORMANCE: BASED ON NSE WEBSITE DATA: SCRIP CODE: NGIL (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 52.90 on May 29, 2024, and opened on an ex-right basis at Rs. 48.45 on May 30, 2024. Since then, it has marked a high/low of Rs. 51.35 / Rs. 37.80. The scrip last closed at Rs. 47.27 as of June 11, 2024. For the last 52 weeks' it has posted a high/low of Rs. 59.32 / Rs. 30.93. 

The promoters' holding has been constant around 60.35% for the last three quarters ended with March 31, 2024. The counter is well managed above the RI price to tempt investors.