• This is the 3rd RI from the company since April 2023.
• The last RI was in the month of December 2023.
• The company has turned the corner for FY24, but has huge carried forward losses.
• It has a strong order book worth Rs. 955 cr. as of March 31, 2024.
• Well-informed/cash surplus investors may park moderate funds for the long term rewards.
PREFACE:
This company is making a hat trick of Rights issue wince April 2023, its first RI came at par in April 2023, 2nd RI at Rs. 13 in December 2023, and now this is 3rd RI at the same price as that of last RI. The only relief this time is it has posted some profits and has turned the corner. Both the previous two RIs were for mobilizing Rs. 49.90 cr. each time. The first RI was in the ratio of 2 for 53 and the second one in the ratio of 1 for 36. This RI details are given below.
ABOUT COMPANY:
SEPC Ltd. (SEPCL) erstwhile known as Shriram EPS Ltd., is engaged in Engineering Procurement and Construction Company (EPC Contractor) business with the experience of executing turnkey contracts in Engineering, Procurement, and Construction (EPC) and providing end-to-end solutions offering multi-disciplinary services and project management solutions.
It has a robust clientele comprising of various Central and State Government agencies such as Ahmedabad Urban Development Authority (AUDA), Kerala Water Authority, Gujarat Water Supply & Sewerage Board (GWSSB), Ahmedabad Municipal Corporation (AMC), Gujarat Water supply & Sewerage Board, Tamilnadu Water and Drainage Board, Karnataka Urban Infrastructure Development Finance Corporation, Bangalore Water Supply & Sewerage Board, Chennai Metro Water Supply & Sewerage Board, Durgapur Steel Plant, Bokaro Steel Plant, SAIL LISCO, Vizag Steel Plant.
SEPC Limited ("SEPC") is focused on providing turnkey solutions in the business areas, i.e. 1. Infrastructure: a. Water & Sewer and, b. Road, 2. Industrial EPC: a. Process Plants, b. Steel Plants, c. EPC under deep shaft Mining and, d. Power Plants. As of March 31, 2024, it has order book worth Rs. 955 cr. Its lion share of revenue comes from water and sever segment.
As of March 31, 2024, it had 229 employees on its payroll, and engages sub-contractor as and when needed.
ISSUE DETAILS:
The company is coming out with 3rd Rights Issue (RI) since April 2023. This RI is of 153846153 equity shares of Rs. 10 each at a fixed price of Rs.13 per share to mobilize Rs. 200 cr. The RI opens for subscription on July 05, 2024, land will close on July 19, 2024. The company is offering RI in the ratio of 6 for 55 to its eligible stakeholders as of the record date of June 25, 2024. The company is asking full amount on application for the number of shares applied. Post allotment, shares will be listed on BSE and NSE. The company is spending Rs. 1.10 cr. for this RI process, and from the net proceeds, it will utilize Rs. 85.00 cr. for repayment/prepayment of certain borrowings, Rs. 111.90 cr. for working capital, and Rs. 2.00 cr. for general corporate purposes.
The issue is solely lead managed by Sumedha Fiscal Services Ltd., and Cameo Corporate Services Ltd. is the registrar to the issue.
Post-RI, its current paid-up equity capital of Rs. 1409.81 cr. will stand enhanced to Rs. 1563.66 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 2032.76 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit/ -(loss) of Rs. 340.59 cr. / Rs. - (263.70) cr. (FY22), Rs. 398.88 cr. / Rs. - (4.90) cr. (FY23), and Rs. 607.21 cr. / Rs.22.78 cr. (FY24). Thus the company has turned the corner for FY24. However, it has huge carried forward losses, that might take some time to wipe out.
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 NSE WEBSITE DATA: SCRIP CODE: DESTINY (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 20.47 on June 24, 2024, and opened on an ex-right basis at Rs. 19.50 on June 25, 2024. Since then, it has marked a high/low of Rs. 20.05 / Rs. 18.56. The scrip last closed at Rs. 19.57 as of July 03, 2024. For the last 52 weeks' it has posted a high/low of Rs. 26.73 / Rs. 8.89.
The promoters' holding has seen some decline to 26.96% as of March 31, 2024, against 27.75% for December 31, 2023, and 27.34% as of December 22, 2023. The counter is well managed above the RI price to lure investors.
Review By Dilip Davda on July 4, 2024
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
