Sharanam Infra RI Jan. 25 issue review - (Avoid)

•    The company is engaged as a trader in supply chain distribution of various steel products in Gujarat and nearby states.
•    This is the 3rd RI from the company since May 2023.
•    Last RI was on January 2024.
•    It posted minuscule financial performance for the reported periods. 
•    Fivefold equity post RI may pose its servicing issue going forward.
•    Though the RI is at par, it’s a High Risk/Low Return bet, one can just skip.

ABOUT COMPANY:
Sharanam Infraproject & Trading Ltd. (SITL) is engaged in supply chain distribution of various steel products in Gujarat & nearby States. Since Company was not very significantly operative, but post new professional management on boarding, it has arrived to a decision to enter and trade and fill gap in supply chain management for steel products in Gujarat.

The Company is not limited to other infrastructural products supply chain distribution but add products like: • Seamless or welded steel pipes • Blooms and slabs • Welded pipe • Electric resistance welding (ERW) • High frequency induction welding (HFI) • Longitudinal submerged arc welding (LSAW) • Seamless pipe • Oil and gas industry usage • Real Estate and Infrastructural projects. 

Since inception, the company changed its registered office five times so far. Its trade receivable cycle of 120 days for coming years raises major concern. The offer document is silent on its employees’ strength. 

ISSUE DETAILS:
The company is coming out with its 3rd Rights Issue (RI) of 480009600 equity shares of Re. 1 each at par value to mobilize Rs. 48.00 cr. The RI opens for subscription on January 13, 2025, and will close on February 10, 2025. The company is offering RI in the ratio of 4 for 1 to its eligible stakeholders as of the record date of December 31, 2024. The full amount is to be paid on application for number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 1.50 cr. for this RI process, and from the net proceeds, it will utilize Rs. 36.00 cr. for incremental working capital, and Rs. 10.50 cr. for general corporate purposes. 

This RI is self-managed by the company itself, and Cameo Corporate Services Ltd. is the registrar to the issue. Registrar to the company is MCS Share Transfer Agent Ltd. For self-managed RI, spending of Rs. 1.50 cr. is surprising and also raise eyebrows.

Post RI, company’s current paid-up capital of Rs. 12.00 cr. will stand enhanced to Rs. 60.00 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 60.00 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit/ - (loss) of Rs.  NIL cr. / Rs. – (0.17) cr. (FY23), and Rs. 1.76 cr. / Rs. 0.03 cr. (FY24). For H1 of FY25 ended on September 30, 2024, it earned a net profit of Rs. 0.36 cr. on a total income of Rs. 3.66 cr. Thus, a sudden boost in its earnings in pre-RI period raise eyebrows and concern over its sustainability. 

So far it has posted minuscule financial performance and nearly fivefold jump in its post-RI paid-up equity may post its servicing issue going forward.

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

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 511557 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 1.11 on December 30, 2024, and opened on an ex-right basis at Rs. 1.07 on December 31, 2024. Since then, it has marked a high/low of Rs. 1.03 / Rs. 0.98. The scrip last closed at Rs. 1.00 as of January 10, 2025. For the last 52 weeks’ it has posted a high/low of Rs. 1.25 / Rs. 0.43. 

The promoters’ holding has been at 0.00% for the last three quarters ended September 30, 2024. The counter is well managed above/around the RI price by vested interest counters to tempt investors.