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Nakoda Group RI June 24 - review (May apply)

Nakoda Group Of Industries Ltd Logo

•    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. 

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. 

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. 

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. 

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. 

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. 

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.

Conclusion / Investment Strategy

The company is making hat trick of RIs since April 2022, and every time we witnessed lower price for RIs. The company is operating in a highly competitive and fragmented segment. Surprisingly, it posted loss for FY24 on a declined top line and that raise concern. The RI is at a discount of around 47% based on its last traded price and appears lucratively priced, but considering loss for FY24, it appears aggressively priced. Well-informed/cash surplus investors may park moderate funds for long term.

Review By Dilip Davda on June 11, 2024

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 the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

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.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

More Nakoda Group Of Industries Ltd RI Views / Analysis / Recommendations ...

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