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• PIL is in the real estate segment as well as the diamond trading business.
• The offer document is missing transparency in its business activities.
• The sudden boost in its bottom lines for the last 21 months raises eyebrows.
• Trebling equity base post-RI may raise higher equity servicing issues.
• There is no harm in skipping this RI - a "high risk-low return" bet.
ABOUT COMPANY:
Prerna Infrabuild Ltd. (PIL) was originally incorporated under the name and style Panchratna Safe Vaults Pvt. Ltd. (PSVPL)and kept changing its name over the years from PSVPL to Prerna Safe Vaults Ltd., to Prerna Infrabuild Ltd. The offer document is silent on the company's business-related info under "Our Business". According to a note on pages 28-29, The company has not independently verified data from industry publications contained therein and although the management believes these sources to be reliable but cannot assure that they are complete or reliable. In a nutshell, PIL is in the real estate segment which is highly competitive and fragmented. It does not have any long-term contracts.
The company has been focusing on The Real Estate Infrastructure specialization by creating and maintaining places for living, working, shopping, learning, recreation and culture, and the critical accompanying support systems ranging from mobility and logistical networks to utilities and energy supply. The overarching theme of the specialization is stewardship - of both the environment and of capital. Essential skills are built around the primary activities of evaluating investment opportunities, matching risk and reward, acquiring, developing and operating real assets, financing capital projects, and leadership of business enterprises. In an industry that comprises the largest sector of GDP growth, this high-demand specialization provides real-world experiential skills connected to current industry realities. It also trades in the diamond industry as a primary business. As of December 31, 2022, it had 10 employees on its payroll.
ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 24085020 shares of Rs. 10 each at a fixed price of Rs.48.17 cr. The issue opens for subscription on May 02, 2023, and will close on May 18, 2023. The full amount is to be paid on the application for the number of shares applied. The company is offering RI in the ratio of 2 for 1 to eligible stakeholders as of the record date of April 21, 2023. Post allotment, shares will be listed on BSE. PIL is spending Rs. 0.50 cr. for this RI process, and from the net proceeds, it will utilize Rs. 46.00 cr. for working capital, and Rs. 1.67 cr. for general corporate purposes.
The issue is self-managed by the company itself and Bigshare Services Pvt. Ltd. is the registrar of the issue.
Post-RI, PIL's current paid-up equity capital of Rs. 12.04 cr. will stand enhanced to Rs. 36.13 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 72.26 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, PIL has posted a total revenue/net profit of Rs. 10.41 cr. / Rs. 0.01 cr. (FY20), Rs. 4.60 cr. / Rs. 0.14 cr. (FY21), and Rs. 23.86 cr. / Rs. 5.87 cr. (FY22).
For 3Qs of FY23 ended on December 31, 2022, it earned a net profit of Rs. 7.05 cr. on total revenue of Rs. 13.54 cr. The sudden boost in its net earnings for the past 21 months raises eyebrows and concern over the sustainability of such margins going forward. As of December 31, 2022, its current paid-up equity capital of Rs. 12.04 cr. is supported by free reserves of Rs. 33.37 cr.
DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects.
SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 531802 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 36.63 on April 20, 2023, and opened on an ex-right basis at Rs. 26.45 on April 21, 2023. Since then, it has marked a high/low of Rs. 29.40 / Rs. 24.05. The scrip last closed at Rs. 24.50 as of April 27, 2023. For the last 52 weeks, it has posted a high/low of Rs. 37.67 / Rs. 19.79.
The promoters' holding is up at 61.51% as of March 31, 2023, against 60.77% as of September 30, 2022. Thus it has inched up amidst market operation to pave the way for fancy pricing for its RI. The counter is well managed above RI pricing to lure investors.
Review By Dilip Davda on April 27, 2023
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 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: dilip_davda@rediffmail.com ).
The Prerna Infrabuild Rights Issue 2023 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 Prerna Infrabuild Rights Issue 2023 worth investing. The Prerna Infrabuild Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if Prerna Infrabuild Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Prerna Infrabuild Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.
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