SEPC Ltd RI review - (May apply)

•    SEPC has failed to live up to the confidence of its investors since listing.
•    The company has turned the corner as per FY23 performance so far. 
•    It has a very high equity base and carried forward losses, that raise major concerns
•    Well-informed/Cash-surplus/Risk seekers may consider parking funds for long-term reward in this at-par issue. 

PREFACE:
In the year 2008, the Company made its maiden initial public offering of 50,00,000 Equity Shares of face value Rs. 10 each for an issue price of Rs. 300/- each aggregating to Rs.  150 cr. Equity Shares of SEPC got listed on BSE & NSE. It has fared poorly on the bourses since listing. The surge in its paid-up equity capital post-RI may pose servicing issue in the near term.

ABOUT COMPANY:
SEPC Ltd. (erstwhile known as Shriram EPC Ltd.) is an ISO 9001-2015 QMS DAkkS, ISO 9001-2015 QMS NABCB, ISO 45001-2018 DAkkS & ISO 14001-2015 EMS DAkkS certified Engineering Procurement and Construction Company (EPC Contractor) engaged in the business of executing turnkey contracts in Engineering, Procurement, and Construction (EPC) and providing end-to-end solutions offering multi-disciplinary services and project management solutions.

SEPC is focused on providing turnkey solutions in the following business areas under two categories. 1. Infrastructure that covers Water and Sewer as well as roads and 2. Process and Metallurgy include Process Plants, Steel Plants, Mine Development and Power Plants. 

SEPC's client list includes Tamil Nadu Water Supply Board, Chennai Metro Water Supply and Sewerage Board, Kerala Water Authority, Gujarat Water Supply and Sewerage Board, Drinking Water and Sanitation Dept., SAIL, Moon Iron and Steel-Oman, Hutti Gold Mines, Suryadev Alloys, OPG Ltd., Birla White Cement, etc. SEPC's technology partners are Primetals, Shandong Goldgroup, Hutni Projekt, Danieli, SMS Group, KMG and Perco. As of February 28, 2023, it had 253 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a rights issue (RI) of 49900000 equity shares of Rs. 10 each at par value to mobilize Rs. 49.90 cr. The company is offering RI in the ratio of 2 shares for every 53 shares held by eligible stakeholders as of the record date of March 29, 2023. The issue opens for subscription on April 10, 2023, and will close on April 24, 2023. The full amount is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. SEPC is spending Rs. 0.67 cr. for this RI process and from the net proceeds, it will utilize Rs. 46.00 cr. for working capital, and Rs. 3.23 cr. for general corporate purposes. 

The RI is self-managed by SEPC itself and Cameo Corporate Services Ltd. is the registrar of the issue. 

Post-RI, SEPC's current paid-up equity capital of Rs. 1321.53 cr. will stand enhanced to Rs. 1371.43 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 1371.43 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, the company has posted a turnover/net profit - Loss of Rs. 582.79 cr. / Rs. - (178.25) cr. (FY21) and Rs. 329.46 cr. / Rs. - (220.92) cr. (FY22). For 3Qs of FY23, it earned a net profit of Rs. 15.24 cr. on a turnover of Rs. 236.62 cr. Though its top line has marked decline, it turned the corner from the 3Qs of FY23. However, it has carried forward losses that raise concerns. 

The market capitalization (full float) of the Company as of February 28, 2023, on BSE and NSE was Rs.  1765.56 cr. and Rs. 1777.46 cr. respectively.

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: 532945 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 11.27 on March 28, 2023, and opened on an ex-right basis at Rs. 11.15 on March 29, 2023. Since then, it has marked a high/low of Rs. 12.30 / Rs. 10.21. The scrip last closed at Rs. 11.33 on April 06, 2023, for the last 52 weeks it has posted a high/low of Rs. 15.83 / Rs. 6.27. The promoters' holding has increased a bit to 47.63% for the last quarter ended on December 31, 2022, against 45.40% as of August 22, 2022. The counter is well managed above the par value to lure investors.