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Saboo Sodium RI review (Avoid)

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•    SSCL is in the business of salt refinery, power generation and resort (hospitality).
•    It has perhaps diversified in non-related business. 
•    Its financial data is non-impressive.
•    Declining promoter's holding raises concern.
•    There is no harm in skipping this at par RI.

Saboo Sodium Chloro Ltd. (SSCL) was primarily incorporated to set up North India's first and the largest fully integrated salt refinery with a capacity of 1 LTPA. Currently, SSCL is engaged in the manufacturing of Iodized salt, solar power generation and operating resort. 

It is marketing its salt under three brands i.e. Surya Salt, Saboo Salt and Tota Salt. It is also manufacturing industrial salt used by textile, cattle feed and other industries. Its resort is operated near Jaipur under the name and style "Samskara Resort & SPA" having 50 rooms capacity. Currently, it has 19 employees on its payroll. 

To part finance its need for working capital (Rs. 17.12 cr.) and general corporate purposes (Rs. 0.35 cr.), SSCL is offering rights issue (RI) of 17895050 equity shares of Rs. 10 each at par to mobilize Rs. 17.90 cr. It is offering RI in the ratio of 74 for 100 to shareholders registered with it on the record date of June 16, 2022. The issue opens for subscription on June 27, 2022, and will close on July 26, 2022. Post allotment, shares will be listed on BSE. Rs. 2.50 per share is to be paid on application and the balance on one or more calls from the company from time to time. SSCL is spending Rs. 0.43 cr. for this RI process.

The issue is self-managed by the company and Beetal Financial & Computer Services Pvt. Ltd. is the registrar to the issue. 

Post RI, SSCL's current paid-up equity capital of Rs. 24.18 cr. will stand enhanced to Rs. 42.08 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 42.08 cr. 

On the financial performance front, for the last three fiscals, SSCL has posted a turnover/net profit (loss) of Rs. 29.00 cr. / Rs. 0.11 cr. (FY20), Rs. 30.76 cr. / Rs. - (0.69) cr. (FY21) and Rs. 79.28 cr. / Rs. 0.02 cr. (FY22). While it has posted inconsistency in its financial performance, the super top line with minuscule profit for FY22 is perhaps to tempt investors for RI support. 

The offer document is silent on the Dividend policy. I presume it will adopt a prudent dividend policy post listing of RI based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 22.70 on June 14, 2022, and opened on an ex-rights basis at Rs. 16.95 on June 15, 2022. Since then it has marked high/low of Rs. 17.30 / Rs. 13.45. The scrip last closed at Rs. 14.70 as of June 17, 2022. Based on this quote, its post-RI market cap stands at Rs. 61.85 cr. The scrip has posted the last 52 weeks high/low of Rs. 24.23 / Rs. 5.81. Promoters' holding is down at 45.67% for March 22 quarter against 55.51% for September 21 quarter. The counter is well operated around RI timings despite poor liquidity as the counter is thinly traded.

Conclusion / Investment Strategy

The company has posted inconsistency in its financial performance for the last three fiscals. The super top line is perhaps to attract investors for RI support. Declining promoter’s holding raises concern. Based on its financial data, RI at par is at a high P/E. There is no harm in avoiding it.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on June 17, 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 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 Saboo Sodium Chloro Limited RI Views / Analysis / Recommendations ...

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