Satyam Silk RI review (Avoid)

Satyam Silk Mills Limited Logo

•    The company that was originally incorporated for the textile business is now a realty company.
•    For FY22 it has posted other income from the sale of property with commensurate profits.
•    Low promoter holding is a major concern. 
•    Scrip is not traded on BSE since July 2005 but is coming out with this RI.
•    There is no harm in skipping this fishy RI offer. 

Satyam Silk Mills Ltd. (SSML) originally incorporated for doing textile-related business is currently engaged in the business of real estate renting. Thus it has nothing to do with the textile segment as expressed in its name.

To part finance its needs for incremental working capital (Rs. 2.72 cr.) and general corporate purposes (Rs. 0.70 cr.), SSML is coming out with at par rights issue of 3675000 equity shares of Rs. 10 each to mobilize Rs. 3.68 cr. The company is offering 5 shares for every 1 share held as of the record date of June 06, 2022. The RI opens for subscription on June 16, 2022, and will close on July 01, 2022. The full amount is to be paid along with the application. Post allotment, shares will be listed on BSE. SSML is spending Rs. 0.26 cr. for this RI process. 

The issue is self-managed by the company while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Post RI, SSML's current paid-up equity capital of Rs. 0.74 cr. will stand enhanced to Rs. 4.41 cr. Based on RI pricing, the company is looking for a market cap of Rs. 4.41 cr. 

On the financial performance front, SSML has posted a turnover/net profit (loss) of Rs. 0.06 cr. / Rs. - (0.29) cr. (FY20), Rs. 0.03 cr. / Rs. - (0.33) cr. (FY21) and Rs. 8.40 cr. / Rs. 6.83 cr. (FY22). For FY22 it has shown other income of Rs. 8.40 cr. (including Rs. 8.11 cr. profit from the sale of the property) while income from operation was NIL. 

The company has not declared any dividend since 2002. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

The scrip is not traded since July 2007 and its last quote is Rs. 3.80 as of July 04, 2005. Since then it has marked high/low of Rs. 3.48 / Rs. 3.48. The scrip last closed at Rs. 3.48 as of July 04, 2005. Based on this quote, its post-RI market cap stands at Rs. 1.54 cr. The scrip has posted the last 52 weeks high/low of Rs. 3.48 / Rs. 3.48 as it is not traded since July 2005. Promoters holding is at 30.37% for the last three quarters. It is really surprising how this company is permitted to float its rights issue when it has had no trades since July 2005.

Conclusion / Investment Strategy

The counter is not traded since July 2005 and despite such status, it has been permitted to come out with rights issue for listing at BSE. It has nothing to do with the textile segment as expressed in its name. This is really surprising and raises eyebrows. It has posted super performance for FY22 with other income, raising doubt on sustainability. Five times rise in its paid-up equity and low promoter holding are major concerns. There is no harm in skipping this at par RI offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jun 11, 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 Satyam Silk Mills Limited RI Views / Analysis / Recommendations ...

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


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