Shree Ram Proteins RI review - (Avoid)

•    SRPL is engaged in the business of de-linting and de-hulling cotton seeds.
•    It has posted erratic financial performance with high inconsistency. 
•    The promoter's holding is just around 22%, lacking confidence. 
•    There is no harm in skipping this "High Risk/Low Return" RI bet.

ABOUT COMPANY:
Shree Ram Proteins Ltd. (SRPL) is engaged in de-linting and de-hulling cotton seeds by mechanical process, oil extraction from cotton seeds and solvent extraction from cotton seeds oil cake and ground nuts. Its manufacturing process is of three stages (I) De-linting and de-hulling of Cotton seeds, this process results in the manufacture of shot fiber (linter), and Delinted cotton Seeds (II) Cotton seeds oil extraction process results in pre-refined cotton seeds oil and cotton seeds oil cake and (III) Solvent extraction process, result in pre refine wash oil and de-oil cotton seeds cake.

Cotton linter can be used in the manufacturing of papers and as raw materials for the manufacture of cellulose, this can be further processed for medical and cosmetic purposes, and linter can be broadly classified as an industrial raw material. Cotton seeds oil cake, cotton seeds de oil cake and cotton hull are used as animal feeds. Cotton seed pre refined oil is further processed by the refinery to convert it into edible oil.

SRPL's manufacturing facility is situated at Survey No.54 P, At- Bhunava, Rajkot- Gondal Highway, Dist. Rajkot. The offer document is silent on its current total employees' strength.

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 214200000 equity shares of Re. 1 at a fixed price of Rs. 2.30 per share to mobilize Rs. 49.27 cr. The issue opens for subscription on July 17, 2023, and will close on July 26, 2023. The full amount is to be paid on application. The company is offering RI in the ratio of 1 for 1 to eligible stakeholders as of the record date of July 06, 2023. Post allotment, shares will be listed on NSE. SRPL is spending Rs. 0.65 cr. for this RI process, and from the net proceeds, it will utilize Rs. 36.32 cr. for working capital, and Rs. 12.30 cr. for general corporate purposes.

The RI is self-managed by the company and Skyline Financial Services Pvt. Ltd. is the registrar of the issue. Beeline Capital Advisors Pvt. Ltd. is the advisor to the issue. 

Post-RI, SRPL's current paid-up equity capital of Rs. 21.42 cr. will stand enhanced to Rs.42.84 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 98.53 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, SRPL has posted a turnover/net profit of Rs. 156.42 cr. / Rs. 2.62 cr. (FY20), Rs. 152.68 cr. / Rs. 0.84 cr. (FY21), Rs. 288.56 cr. / Rs. 6.14 cr. (FY22), and Rs. 162.73 cr. / Rs. 3.85 cr. Thus it has posted inconsistency in its top and bottom lines. Surprisingly, instead of giving summarized statements of its financial data as certified by CA, it has given the last four fiscals Annual Reports in the Offer Documents. There is an I. Tax demand notice on the company for Rs. 2.38 cr. with the interest of Rs. 0.05 cr. that is still pending.

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: SRPL (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 3.45 on July 05, 2023, and opened on an ex-right basis at Rs. 3.00 on July 06, 2023. Since then, it has marked a high/low of Rs. 3.30 / Rs. 2.90. The scrip last closed at Rs. 2.75 as of July 14, 2023. For the last 52 weeks, it has posted a high/low of Rs. 10.92 / Rs. 2.67. The counter is currently under ESM - Stage 1. 

The promoters' holding has declined from 50.32% as of June 30, 2022, to 19.34% as of Marcy 31, 2023 and it is again up to 22.77% as of May 20, 2023. It appears to keep the counter live in some market operations by promoters. The counter is well managed above the par value to lure investors.