Sharat Ind. BSE RI review - (May apply)

•    The company claims to be the oldest integrated aquaculture company.
•    It has posted degrowth in its top and bottom lines for FY24 indicating the likely scenario going forward.
•    The RI appears fully priced discounting all near term positives.
•    Well-informed investors may park moderate funds for long term.

ABOUT COMPANY:
Sharat Industries Ltd. (SIL) erstwhile known as Sharat Sea Foods Ltd., is the oldest integrated aquaculture company in India. In its initial years, the company successfully cultured and processed Black Tiger shrimp before eventually producing Scampi shrimp. The company claims to be the pioneer of Vannamei (white shrimp) culture in India. 

Through the efforts of its efficient management and able team, SIL has sustained itself for almost three decades in the ever so fluctuating field of aquaculture in India. With forward thinking and timely action, the company has managed to sail through several turbulent phases in the aquaculture industry. At a time when the aquaculture industry was at an all-time low, owing to the failure of black tiger and scampi culture, SIL gave a new lease of life to the industry by introducing Vannamei breeding and culture in the country. Through this initiative, currently, Vannamei is now a household name in the aquaculture dependent states of India.

Having exported its products to clients all over the world for more than 15 years, SIL is well equipped to cater to the needs of different market segments. The Company's adherence to stringent quality standards has ensured a demand for its wide range of products. The Company has a blend of youthful and experienced work force that constantly tries to innovate and deliver results by adopting the best practices in the field. The Company consists of four divisions: (1) Shrimp Hatchery; (2) Farm; (3) Feed Mill; and (4) Processing Plant.

SIL produces a wide range of raw and cooked frozen-shrimp as per the customers' specifications. With the strategic location of its aquaculture farm and processing plant, SIL ensures the freshest quality shrimp for its processing operations. The Company also has a well-integrated farmer network to ensure product traceability and the procurement of healthy, antibiotic-free shrimp. By being a vertically integrated aquaculture Company, SIL monitors and controls the quality of the product (shrimp) at every stage. The offer document is silent on its head count.

ISSUE DETAILS:
The company is coming out with Right Issue (RI) of 15543125 shares of Rs. 10 each at a fixed price of Rs. 31 per share to mobilize Rs. 48.18 cr.  The RI opens for subscription on July 24, 2024, and will close on August 07, 2024. The company is offering RI in the ratio of 13 for 20 shares held to its eligible stakeholders as of the record date of July 12, 2024. The company is asking for Rs. 7.75 per share on application and the rest by one or more calls as decided by the company from time to time. Post allotment, shares will be listed on BSE. The company is spending Rs. 1.00 cr. for this RI process, and from the net proceeds, it will utilize Rs. 38.50 cr. for working capital, and Rs. 8.68 cr. for general corporate purposes.

This RI is self-managed by the company and Cameo Corporate Services Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 23.91 cr. will stand enhanced to Rs. 39.46 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 122.31 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit of Rs. 336.01 cr. / Rs. 6.54 cr. (FY23), and Rs. 302.75 cr. / Rs. 5.87 cr.  (FY24). It has posted degrowth in its top and bottom line for FY24. Its outstanding borrowing of Rs. 95.50 cr. as of March 31, 2024, raises concern.

DIVIDEND POLICY:
The company has not declared any dividends for FY21 to FY23, but declared a token dividend of 2.50% for the period April 01,2023 till the filing of this offer document (paid in November/December 2023). This can be termed as an eyewash before the RI to attract investors. 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: 519397 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 72.00 on JULY 11, 2024, and opened on an ex-right basis at Rs. 53.08 on JULY 12, 2024. Since then, it has marked a high/low of Rs. 53.08 / Rs. 41.09. The scrip last closed at Rs. 46.85 as of July 23, 2024. For the last 52 weeks' it has posted a high/low of Rs. 64.95 / Rs. 32.59. The counter is currently under ESM: Stage 1.

The promoters' holding has been constant at 38.95% for the last three quarters ended with June 30, 2024. The counter is well managed above the RI price by the vested interest operators to lure investors.