Silgo Retail RI (NSE) review - (Avoid)

•    SRL is in the business of silver jewellery manufacturing/trading and marketing. 
•    It has posted lack-luster performances for the reported periods. 
•    Doubling paid-up equity post-RI may lead to its servicing issue. 
•    There is no harm in skipping this "High Risk/Low Return" bet. 

ABOUT COMPANY:
Silgo Retail Ltd. (SRL) is engaged in the business of designing, manufacturing, retailing, and wholesaling of silver jewellery. In addition to the designing and manufacturing of silver jewellery, it has recently started dealing in gem stones as well. It offers a wide range of products of silver jewellery for special occasions such as weddings and festivals to daily-wear jewellery for all ages, genders and across various price points. 

Its product portfolio includes rings, earrings, bracelets, necklaces, jhumki, bangles, and customized pieces tailored that cater to customers taste, preference, choice and the ever-changing trends. Its portfolio offers customers a wide variety of traditional, Indo-western, & modern design and silver jewellery. Specializing in silver jewellery, its offerings bear the BIS hallmark certification, ensuring authenticity. 

All its jewellery is crafted from 925 sterling silver. Catering to various occasions, its collection spans from special event pieces for weddings and festivals to daily wear jewellery suitable for all age, available at different price points.

SRL started dealing in gemstones starting from Fiscal year 2022, marking a significant expansion in its product offerings. Its foray into the world of gemstones signifies not just a business venture but also indicates dedication towards serving clientele with best ability.

The company was previously involved in the export of silver jewelry. However, due to the adverse effects of the COVID-19 pandemic on international markets, due to a decline in opportunities in the global market, it fulfilled existing orders and temporarily scaled back its operations. With international markets now showing signs of recovery, the company is planning to resume its focus, particularly on penetrating the US markets. As of September 30, 2023, it had 20 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 10270000 equity shares of Rs. 10 each at a fixed price of Rs. 25 per share to mobilize Rs. 25.68 cr. The issue opens for subscription on February 28, 2024, and will close on March 12, 2024. The company is offering RI in the ratio of 1 for 1 to its eligible stakeholders as of the record date of February 22, 2024. The full amount is to be paid on application for the number of shares applied. Post allotment, shares will be listed on NSE. The company is spending Rs. 0.38 cr. for this RI process, and from the net proceeds, it will utilize Rs. 12.04 cr. for repayment of unsecured loans in full, Rs. 3.65 cr. for repayment of certain secured loans, Rs.  8.55 cr. for working capital, and Rs. 1.06 cr. for general corporate purposes.

The issue is solely lead managed by Srujan Alpha Capital Advisors LLP and Bigshare Services Pvt. Ltd. is the registrar of the issue. 

Post-RI, company's current paid-up equity capital of Rs. 10.27 cr. will stand enhanced to Rs. 20.54 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 51.35 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company posted a total income/net profit of Rs. 35.14 cr. / Rs. 2.31 cr. (FY22), and Rs. 34.68 cr. / Rs. 2.35 cr. (FY23). Thus it posted a static performance for the last two fiscals. 

For H1 of FY24 ended on September 30, 2023, it earned a net profit of Rs. 1.30 cr. on a total income of Rs. 16.22 cr. This hints at marginal improvement in top and bottom lines arithmetically.

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: SILGO (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 35.00 on February 21, 2024, and opened on an ex-right basis at Rs. 29.40 on February 22, 2024. Since then, it has marked a high/low of Rs. 29.40 / Rs. 28.30. The scrip last closed at Rs. 28.30 as of February 26, 2024. For the last 52 weeks' it has posted a high/low of Rs. 37.07 / Rs. 12.28. 

The promoters' holding has declined from 64.63% as of December 31, 2021, to 53.24% as of December 31, 2023. The counter is well managed above the RI price to lure investors.