FREE Account Opening + No Clearing Fees

Sobhagya Mercantile RI review (Avoid)

Sobhagya Merchantile Ltd. Logo

•    The company has many verticals of business, which looks attractive. 
•    Its financial performance may lure investors as the performance is on a tiny equity of Rs. 0.24 cr., inflating its earnings.
•    The counter is under Periodic Call Auction/ESM: Stage 2 with last trade at Rs. 36.44 on April 12, 2024. Thus it has no cum-right/ex-right quotes.
•    35 times higher equity post RI raise concern over its servicing. 
•    There is no harm in skipping this tempted but risky bet.

Sobhagya Mercantile Ltd. (SML) which was primarily in the business of leasing, now it is in the Infrastructure Sector with key focus on infrastructure construction, engineering, mining, and other allied activities. It offers competitive business solutions in the areas of Road Development, Infrastructure Engineering, Equipment leasing, Mining, Steel and more. Each Business vertical is headed by an able, experienced and proven professionals to take the company to the next level of growth.

It has recently decided to foray into steel manufacturing and are in the process of establishing a state of art steel plant, thus expanding its business scope and positioning as a crucial partner in India's growth. Its range of services includes engineering design, planning and estimation of a project, market studies, feasibility report preparation, project management services, architectural and construction engineering services, project commissioning, operations and maintenance, and special advisory services for road and irrigation projects. 

The company is presently engaged in the construction of large-scale infrastructure. Its focus area includes Civil construction projects particularly the construction of roads across the country. The Company also intends to exploit the opportunities that are available in the area of leasing of equipment. Recognizing the promising potential of the Construction Equipment leasing business, the company has chosen to enter this industry during the fiscal year 2022-2023. In its initial year, the company has adopted a cautious approach by leasing top-tier equipment from external providers. As revenue from the leasing business increases, the company plans to progressively invest in its own high-value equipment in the forthcoming years as dictated by demand.

The Company has chosen to outsource its entire payroll management to MKS Multimedia Private Limited. During the financial year 2022-23, MKS Multimedia Private Limited has engaged approximately 39 employees to work for our Company.

The company is coming out with its Rights Issue (RI) of 8160000 equity shares of Rs. 10 each at a fixed price of Rs. 21 per share to mobilize Rs. 17.14 cr. The RI opens for subscription on May 06, 2024, and will close on May 21, 2024. The company is offering RI in the ratio of 34 for 1 to its eligible stakeholders as of the record date of April 23, 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. 15.00 cr. for working capital, and Rs. 1.64 cr. for general corporate purposes.

The issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd. and Purva Sharegistry (I) Pvt. Ltd. is the registrar to the issue. 

Post RI, company's current paid-up equity capital of Rs. 0.24 cr. will stand enhanced to Rs. 8.40 cr. Based on RI pricing, the company is looking for a market cap of Rs. 17.64 cr. The whopping 35 times increase in its post-RI equity may face servicing issues. 

On the financial performance front, for the last three fiscals, the company has posted a total revenue/net profit of Rs.42.37 cr. / Rs. 7.91 cr. (FY21), Rs. 71.62 cr. / Rs. 10.96 cr. (FY22), and Rs. 112.08 cr. / Rs. 10.73 cr. (FY23). For 9M of FY24 ended on December 31, 2023, it earned a net profit of Rs. 7.61 cr. on a total revenue of Rs. 83.58 cr. While it posted growth in its top line from FY21 to FY23, it marked pressure on bottom line for FY23. Its net profit margins reduced from 18.66% for FY21 to 9.18% for 9M-FY24.

The company has not declared any dividends for the last five years. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

The counter is having periodic call auction with its last trade at Rs. 36.44 on April 12, 2024. And thus has no data for its cum-right/ex-right quote and due to this reason its post-RI High/Low data too is missing. The scrip last closed at Rs. 36.44 as of April 12, 2024 and cannot be the guide to consider its RI at the price it is being offered. For the last 52 weeks' it has posted a high/low of Rs. 36.44 / Rs. 12.16. The counter is currently under Periodic Call Auction and ESM: Stage 2, with last trade on April 12, 2024 at Rs. 36.44, which may misguide the investors at large.

The promoters' holding has been constant at 34.51% for the last three quarters ended with March 31, 2024. 

Conclusion / Investment Strategy

Investors beware, this counter had its last trade on April 12, 2024, with no indication of its cum-right/ex-right quotes and the latest price. The last trade price of Rs. 36.44 on April 12, 2024, it totally misleading and may tempt investors. But investors can simply ignore this RI from the company that had no regular trades on BSE.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on May 3, 2024

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

More Sobhagya Merchantile Ltd. RI Views / Analysis / Recommendations ...

The Sobhagya Merchantile Rights Issue 2024 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Sobhagya Merchantile Rights Issue 2024 worth investing. The Sobhagya Merchantile Rights Issue 2024 Note sets the Rights Issue expectations in systematic way which tells you if Sobhagya Merchantile Rights Issue 2024 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Sobhagya Merchantile Rights Issue 2024 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.