Rajath Finance BSE RI March 2025 review - (Avoid)

•    The company is an RBI registered NBFC engaged in finance related solutions and services.
•    It has posted erratic financial performances so far, with mounting losses from FY23 onwards.
•    The counter has not seen any trading since January 01, 2025.
•    This is the 2nd RI from the company since October 1998.
•    It is operating in a highly competitive and fragmented segment.
•    Promoters’ holding above 73.7% is the only positive point.
•    There is no harm in skipping this risky bet though it’s at par value.

PREFACE:
Aho Ashcharyam, this company is coming out with its RI that is opening on March 04, 2025, but its offer letter was made available on designated exchange only on the previous eve i.e., on March 03, 2025. The Offer letter is dated February 14, 2025. Why it took so long time for making it public is a million-dollar question and the related parties and regulators are answerable for the same. Will they??? This amounts to seer violation of regulations and deliberation behind doing so. What is more, this RI has a lead manager called Bonanza Portfolio Ltd, indicating how they are following compliances. Another big surprise is that it has no trades whatsoever since December 30, 2024, but still it got permission for its RI, and promoter holding is at 73.75%. This is the 2nd RI from the company since October 1998.

ABOUT COMPANY:
Rajath Finance Ltd., (RFL) – erstwhile known as Rajath Leasing and Finance Ltd., is registered with Reserve Bank of India (RBI) as a Non-Banking Financial Company (NBFC) under section 45 IA of the Reserve Bank of India Act 1934 vide certificate of registration dated August 12, 2024 bearing No. B-13.02490. The Equity Shares of the Company are listed at BSE Limited. The shares of the company are admitted with both the depositories Central Depository Services Ltd. & National Securities Depository Ltd.

RFL is client’s one-stop partner for growth, offering a comprehensive suite of loans and supply chain financing solutions designed to unlock MSME Company’s full potential. It goes beyond financing, providing expert guidance to clients to help navigate their financial landscape and achieve their business goals. As a part of prudential norm, all types of loans shall have a threshold limit of 15% of capital at individual level and a cap of 25% of the capital at group level of borrowers.

The Company will largely operate on digital first mode which means company will operate through digital medium. It will source customers through various business partners and fintech entities based on the products it is offering. The company proposes to do own book lending as well as co-lending with other NBFC’s and banks. It may also explore to do Business Correspondence (BC) for larger Financial Institution or, NBFC’s or banks. As of October 31, 2024, it had just 6 employees on its payroll.

ISSUE DETAILS:
The company is coming out with Rights Issue (RI) of 16000000 equity shares of Rs. 10 each at par value to mobilize Rs. 16 cr. The RI is opening for subscription on March 04, 2025, and will close on March 18, 2025. The company is offering RI in the ratio of 4 for 1 to its eligible stakeholders as of the record date of February 21, 2025. This is the 2nd RI from the company since October 1998. The company is asking for full money on application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.30 cr. for this RI process, and from the net proceeds, it will utilize Rs. 11.93 cr. for augmenting capital base, and Rs. 3.77 cr. for general corporate purposes.  However, page no. 49 of the offer document has two set of utilization of funds as shown above at one place and Rs. 11.86 cr. for augmenting capital base and Rs. 3.84 cr. as general corporate purposes on the other. This query needs clarification from the related parties. 

The RI is lead managed by Bonanza Portfolio Ltd., and MUFG Intime India Pvt. Ltd. is the registrar to the issue. 

Post-RI, company’s current paid-up equity capital of Rs. 4.00 cr. will stand enhanced to Rs. 20.00 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 20.00 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last four fiscals, the company has posted total income/net profit/ - (loss) of Rs. 0.37 cr. / Rs. 0.01 cr. (FY21), Rs. 0.34 cr. / Rs. 0.24cr. (FY22), Rs. 0.33 cr. / Rs. – (0.11) cr. (FY23), Rs. 0.09 cr. / Rs. – (1.25) cr. (FY24). For H1 of FY25 ended on September 30, 2024, it posted a loss of Rs. – (1.12) cr. on a total revenue of Rs. 0.12 cr. Thus, the company has posted erosion in its top and bottom lines from FY 23 onwards with minuscule operations.

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

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 507962 (FV Rs. 10)
The scrip last closed on cum-right basis at Rs. NA on February 20, 2025, and opened on an ex-right basis at Rs. NA on February 21, 2025. Since then, it has marked a high/low of Rs. NA / Rs. NA. The scrip last closed at Rs. 29.17 as of December 30, 2024. For the last 52 weeks’ it has posted a high/low of Rs. 29.17 / Rs. 21.79. The counter is currently under GSM: Stage 3. Currently trading it restricted for this counter on account of GSM.

The promoters’ holding has been constant at 73.75% for the last quarter ended with December 31, 2024. To a great surprise, the counter is having no trades since January 01, 2025, and whatever trades reported are just of few shares. Thus, the counter appears highly manipulated.