Sharanam Infra RI January 24 review - (Avoid)

•    The company is in a business of distribution of various steel products.
•    It wants to have diverse activities like real estate and related services.
•    The company has posted loss for the last 18 months with no activities. 
•    Its last traded price is Rs. 0.90 i.e. below the RI price.
•    This is the second right issue from the company. The last RI was in May 2023. 
•    There is no harm in staying away from this at par RI.

ABOUT COMPANY:
Sharanam Infraproject and Trading Ltd. (SITL) was originally incorporated as Skyhigh Projects Ltd. and changed its name in July 2015 to its current name. The Company 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, Company has arrived to a decision to enter and trade and fill Gap in Supply chain management for steel products in Gujarat.

 The initial object of the Company was to set up facilities for manufacture of wrist watch cases. To Engage in the business of real estate and in particular purchase and sale of land and or building and owning and buying selling hiring letting, sub-letting, maintaining allotting, transferring allotment, administering, exchanging mortgaging, accepting lease, tenancy or sub tenancy and constructing, reconstructing, extending, altering or demolishing building or demolishing building or tenements, block, flats, shops, godowns, materials incidental to construction, repair, overhaul or maintenance of land and building to fix and collect rents.

ISSUE DETAILS:
The company is coming out with a Right Issue (RI) of 70001400 equity shares of Re. 1 each at par value to mobilize Rs.7.00 cr. The issue opens for subscription on January 24, 2024, and will close on February 02, 2024. The company is offering RI in the ratio of 7 for 5 to eligible stakeholders as of the record date of January 10, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.50 cr. for this RI process and from the net proceeds, it will utilize Rs. 6.50 cr. for working capital. This is the second RI from the company, the last RI was in the month of May 2023.

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

Post-RI, company's current paid-up equity capital of Rs. 5.00 cr. will stand enhanced to Rs. 12.00 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 12.00 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company posted a total income/net profit/ -(loss) of Rs. 0.18 cr. / Rs. 0.02 cr. (FY22), and Rs. 0.00 cr. / Rs. - (0.17) cr. (FY23). For H1 of FY24 ended on September 30, 2023, it posted a loss of - (0.07) cr. on a total income of NIL. Thus, currently it is a loss making company. 

More than doubled post-RI equity will face servicing issue as the company is incurring losses at present.

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: 539584 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 1.45 on January 09, 2024, and opened on an ex-right basis at Rs. 1.30 on January 10, 2024. Since then, it has marked a high/low of Rs. 1.36 / Rs. 0.90. The scrip last closed at Rs. 0.90 as of January 20, 2024. For the last 52 weeks' it has posted a high/low of Rs. 1.36 / Rs. 0.62. 

The promoters' holding has been constant at 0.00% for the last three quarters ended with December 31, 2022. The counter is trading at a discount to its RI price. The counter is currently under GSM Stage 2.