Sru Steels BSE RI review - (Avoid)

•    The company is in the business of trading in various types of iron and steel. 
•    It marked average financial performance for the last two fiscals. 
•    Five-fold equity post RI may witness servicing issue considering minuscule earnings.
•    Though this RI is at par, it is a "High Risk/Low Return" bet.
•    There is no harm in skipping this at par bet. 

ABOUT COMPANY:
SRU Steels Ltd. (SSL) is operating in the single business segment of trading in various type of Iron and Steel. At present, the company is trading in various types of steel products as well as sale of steel products on commission basis. Further, in the anticipation of growing demand of steel and steel products in future due to the development of various infrastructure and housing projects and is further planning to add on the mode of distribution of products in the market via direct sale to the customer along with consignment sales. The Company also has a franchisee of M/s Jindal Steel & Power Limited for trading in steel.

The Company offers various products to cater to the specific needs of clients. SSL's diverse product portfolio includes products such as Aluminium Bars, Rods & Profiles, Aluminium Powder, Aluminium Scrap, Ammonium Molybdenum, G I Pipe, Graphite Flakes and Circle, Graphite Powder, Graphite Rods, Blocks and Plates, Graphite Scrap, Graphite Square and Round, M S Pipe, M S Sheet amongst others. The company services customers with products ranging to all sizes, grades, and standards under one roof. As of March 31, 2024, it had 8 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with a Rights Issue (RI) of 47951400 equity shares of Rs. 10 each at par value to mobilize Rs. 47.95 cr. The RI has already opened for subscription on September 09, 2024, and will close on September 24, 2024. The company is offering RI in the ratio of 4 for 1 to its eligible stakeholders as of the record date of August 31, 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. 0.75 cr. for this RI process and from the net proceeds, it will utilize Rs. 40.00 cr. for working capital, and Rs. 7.20x cr. for general corporate purposes.

The issue is self-managed by the company itself, and Beetal Financial & Computer Services (P) Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 11.99 cr. will stand enhanced to Rs. 59.94 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 59.94 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, the company has posted a total revenue/net profit/ - (loss) of Rs. 16.72 cr. / Rs. 0.70 cr. (FY23), Rs. 18.32 cr. / Rs. 0.32 cr. (FY24). 

DIVIDEND POLICY:
The company paid an interim dividend of 1% in March 2023. 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: 540914 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 10.43 on August 29, 2024, and opened on an ex-right basis at Rs. 10.49 on August 30, 2024. Since then, it has marked a high/low of Rs. 12.50 / Rs. 10.00. The scrip last closed at Rs. 11.22 as of September 06, 2024. For the last 52 weeks' it has posted a high/low of Rs. 15.77 / Rs. 7.67. The counter is currently under ASM LT: Stage 1.

The promoters' holding stands at ZERO for quarter ended on June 30, 2024 against 4.65% for previous two quarters ended with March 31, 2024. The counter is well managed above the par value to lure investors.