Sprayking Agro BSE SME RI review - (Avoid)

•    SAEL is engaged in the manufacturing and trading of agricultural sprayer parts etc.
•    Post RI its equity will be doubled and may post servicing issues. 
•    It has not marked any trades on BSE SME since January 20, 2023. (Till 10.02.23)
•    There is no harm in ignoring this RI which is priced very aggressively. 

PREFACE:
The company came with its maiden IPO of Rs. 1.86 cr. in August 2016 at a price of Rs. 21 per share. It operated well till January 20, 2023, with the last quote at Rs. 44 per share. But thereafter no trades have raised eyebrows as its ex-right quote is not available. No volume for over two weeks now also raises concern. Though now it's nearly eight years, and the counter is on the SME platform and may remain there for many years to come as after the rights issue, its paid-up equity capital though doubled, it remains at just Rs. 6.35 cr. The expanded equity capital might face servicing issues as well.  

ABOUT COMPANY:
Sprayking Agro Equipment Ltd. (SAEL) is in the business of manufacturing and trading agricultural sprayer parts & garden fittings, ball valves & NRV'S, turning components, brass pipe & plumbing fittings, sanitary fittings, brass compression fittings, extruded brass rods, brass fittings & lead-free brass fittings and forging speciality. 

Its manufacturing unit is located in Jamnagar. In its trading business, based on the orders received from customers, the company orders the exact requirement from its suppliers and makes the final product available to the customers. Thus it is doing third-party marketing which is a high-risk/low-return segment. As of the date of filing this offer documents, it had 9 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a rights issue of 3172769 equity shares of Rs. 10 each at a fixed price of Rs. 44 per share to mobilize Rs. 13.96 cr. It is offering RI in the ratio of 1 for 1 to eligible stakeholders as of the record date of February 02, 2023. The issue opens for subscription on February 13, 2023, and will close on February 20, 2023. On application, the full amount is to be paid for the number of shares applied. Post allotment, shares will be listed on BSE SME. SAEL is spending Rs. 0.25 cr. for this RI process, and from the net proceedings, it will utilize Rs. 10.66 cr. for working capital and Rs. 3.05 cr. for general corporate purposes. 

Aryaman Financial Services Ltd. is the sole lead manager and Bigshare Services Pvt. Ltd. is the registrar of the issue.

Post-RI, SAEL's current paid-up equity capital of Rs. 3.17 cr. will stand enhanced to Rs. 6.35 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 27.92 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a turnover/net profit of Rs. 20.50 cr. / Rs. 0.62 cr. (FY21) and Rs. 16.00 cr. / Rs. 0.35 cr. (FY22). For H1 of FY23, it earned a net profit of Rs. 0.09 cr. on a turnover of Rs. 6.10 cr. Thus it has marked inconsistency in its top and bottom lines for the reported periods. 

DIVIDEND POLICY:
The offer document is silent on the company's dividend policy. It may adopt a prudent dividend policy post-listing of RI based on its financial performance and future prospects. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 540079 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 44.00 on January 20, 2023, and thereafter it has not witnessed any trades. Thus its ex-right quote is not available. It has reported the last 52 weeks' high/low of Rs. 51.30 / Rs. 20.10 (without the impact of the rights issue). The promoter's holding has been constant at 72.77% for the quarter that ended on Sept. 21, March 22, and September 22. (This is due to the permissible six monthly reporting of data). No trades despite market-making aspects for SME counters is really surprising.