Spright Agro RI review - (Avoid)

•    The company is in the trading business of agriculture commodities.
•    It is operating on third party contract basis, which is a highly risky business.
•    The company operates in a highly competitive and fragmented segment. 
•    Based on its financial performance so far, the issue appears aggressively priced. 
•    There is no harm in skipping this" high-risk/low return" bet. 

ABOUT COMPANY:
Spright Agro Ltd. (SAL) that was originally incorporated under the name of Kansal Fibres Ltd., in 1994 and was rechristened as Tien Agro Ltd. in 2021, and finally in March 2024, it renamed as Spright Agro Ltd.  It is engaged in the business of trading of agricultural commodities such as wheat, rice, maize, vegetables including capsicum, tomato, Green Chilly, Onion, Potato etc., Fruits including Apple, Red Dragon, Sweet Lime, Pomegranate and other agricultural products. The company is also engaged in contract manufacturing for agricultural products such as Potato, Cucumber and Onion.

The company sources the agricultural products from the manufacturers by paying an advance payment or as per agreed terms and then these products are sold to its network of distributors. Owing to its presence in the market, the company has built strong relationships with both the farmers as well as with the wholesaler/retailers' community in contract manufacturing, it leases an agricultural land on lease and cultivate Cucumber, Onion and Castor for meeting the demand in the market. This gives the company control over the entire process and getting the agricultural produces at better rates as compared to the market. 

A part of the yield is shared with the farmers working on contractual basis on the leased land, which further helps the local farmers' community. As of the date of filing this offer document, it had just 9 employees on its payroll. The company is largely depending on third party contracts for its business. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 33484611 equity shares of Re.1 each at a fixed price of Rs. 13.40 per share to mobilize Rs. 44.87 cr. The RI opens for subscription on June 24, 2024, and will close on July 12, 2024. The company is offering RI in the ratio of 1 for 15 to eligible stakeholders as of the record date of June 07, 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. 0.40 cr. for this RI, and from the net proceeds, it will utilize Rs. 34.15 cr. for working capital, and Rs. 10.32 cr. for general corporate purposes.

The issue is self-managed by the company itself, and Skyline Financial Services Pvt. Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 50.23 cr. will stand enhanced to Rs. 53.58 cr. Based on the RI pricing, the company is looking for a market cap of Rs.  717.91 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total income/net profit of Rs. 7.71 cr. / Rs. 0.01 cr. (FY23), and Rs. 72.59 cr. / Rs. 11.62 cr. Bumper top and bottom line appears to have been window dressing to support the aggressive pricing of the issue. 

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 BSE WEBSITE DATA: SCRIP CODE: 531205 (FV Re. 1).
The scrip last closed on cum-right basis at Rs. 35.80 on June 06, 2024, and opened on an ex-right basis at Rs. 36.12 on June 07, 2024. Since then, it has marked a high/low of Rs. 45.69 / Rs. 36.12. The scrip last closed at Rs. 45.69 as of June 21, 2024. For the last 52 weeks' it has posted a high/low of Rs. 45.69 / Rs. 0.63. The counter is currently under ESM: Stage 2.

There is no promoters' holding in this company and counter is totally operated by vested interests. The counter is well managed above the RI price to tempt investors.