N C L Research RI review (Avoid)

N.C.L. Research And Financial Services Limited Logo

•    NCL is engaged in providing financial services and investment in the stock markets.
•    Its financial performance for the reported periods of the offer document is not impressive.
•    Promoter's holding is a mere 2.79% as of March 31, 2022.
•    There is no harm in skipping this at par RI.

NCL Research & Financial Services Ltd. (NCL) - (erstwhile known as Navneet Commercial Co. Ltd.) is a non-Deposit taking Non-Banking Financial Company (NBFC) registered with RBI to carry on the NBFI activities under Section 45IA of the Reserve Bank of India Act. 

As a Non-Banking Financial Company (NBFC) it is involved in providing financial services with a paramount focus on Micro, Small and Medium Enterprises (MSMEs) small and medium enterprises (SMEs), corporate and non-corporate sectors. Its loan portfolio as of December 31, 2021, was Rs.  21.23 cr. NCL provides both secured and unsecured loans based on the risk profiles of the clients. 

The Company is also engaged in making investments in the form of Equity in various companies, both listed and unlisted. It is not bound by pre-defined restrictions in regard to the search for investment opportunities. It invests in companies in a variety of markets and stages. The company needs sufficient financial liquidity and resources to be able to meet demands and opportunities from its growth plans as they arise over time. The investment strategies are mostly long-term and are based on an analysis of investment fundamentals. NCL's investments range from very complex financial instruments to more basic schemes. As of the date of this offer document, it had 9 employees on its payroll.

To part finance its funding needs to augment its capital base (Rs. 37.86 cr.) and general corporate purposes (Rs. 9.50 cr.), NCL is coming out with a rights issue (RI) of 488628000 equity shares of Re. 1 each at par to mobilize Rs. 48.86 cr. The company is offering 21 shares against 25 shares held by the shareholders on the record date of May 09, 2022. The issue is opening for subscription on May 16, 2022, and will close on May 27, 2022. Post allotment, shares will be listed on BSE. NCL is spending Rs. 1.50 cr. for this RI process.

The issue is solely lead managed by Inventure Merchant Banker Services Pvt. Ltd. and Purva Sharegistry (India) Pvt. Ltd. is the registrar to the issue. 

Post RI company's current paid-up equity capital of Rs. 58.17 cr. (581700000 shares) will stand enhanced to Rs. 107.03 cr. (1070328000 shares). Based on the RI pricing, the NCL is looking for a market cap of Rs. 107.03 cr.

On the financial performance front, for the last three fiscals, NCL has posted a total income/net profit of Rs.3.40 cr. / Rs. 0.11 cr. (FY19), Rs. 2.44 cr. / Rs. 0.02 cr. (FY20) and Rs. 1.86 cr. / Rs. 0.01 cr. (FY21). As per the un-audited results, NCL has earned a net profit of Rs. 0.35 cr. on a total income of Rs. 1.28 cr. for the nine months period of FY22 ended on December 31, 2021. From FY19 to FY21 it marked declining trends in its top and bottom lines, but surprisingly it has posted growth in its working for a 9M-FY22 period. 

The company has not paid any dividends for the reported periods of the offer documents. It will adopt a prudent dividend policy based on its financial performance and future prospects.

The scrip last closed on cum-right basis at Rs. 1.26 on May 05, 2022, and opened on the ex-rights basis at Rs. 1.15 on May 06, 2022. Since then, it has marked a high/low of Rs. 1.38 / Rs. 1.05. The scrip last closed at Rs. 1.23 as of May 13, 2022. Based on this quote, its post-RI market cap stands at Rs. 131.65 cr. The scrip has posted the last 52 weeks high/low of Rs. 2.81 / Rs. 0.08. Promoters' holding is at 2.79% for the last three quarters ended on March 31, 2022. The counter is well operated by vested interests around RI timings.

Conclusion / Investment Strategy

The company has posted dismal financial performance for the last three fiscals. Though the RI is at par value, it is at a very high P/E based on its latest earnings. Mega post RI equity base will find difficulty in servicing the equity capital base. There is no harm in skipping this at par RI

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 15, 2022

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. Any reader taking decisions based on any information published here does so entirely at its 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.

(SEBI registered Research Analyst-Mumbai).

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.


More N.C.L. Research And Financial Services Limited RI Views / Analysis / Recommendations ...

The NCL Research Rights Issue 2022 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 NCL Research Rights Issue 2022 worth investing. The NCL Research Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if NCL Research Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in NCL Research Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.