Suditi Industries RI review - (Avoid)

•    SIL is a comprehensive manufacturer in the textile segment. 
•    It has marked losses for the last three fiscals. 
•    As per financial data, its NAV was minus Rs. 11.17 per share as of June 30, 2022.
•    There is no harm in ignoring this pricy bet.

ABOUT COMPANY:
Suditi Industries Ltd. (SIL) is in the business of manufacturing fabrics and has over the years developed into a comprehensive ecosystem covering knitting, dyeing, printing, finishing, and garments.  It has three manufacturing facilities, two in Maharashtra and one in Gujarat, with an installed annual capacity of 12 lakh pieces of garments, and 4050 mtpa for dyeing. 

In 2010, SIL started its retail business with RIOT brand (owned by a group company) and today it has several brands including YouWeCan, Nush, IndianInk, and licensed sports brands NBA, FC Barcelona, and Manchester City F.C. As of the date of filing this offer document, it had 132 employees on its payroll. 

ISSUE DETAILS:
To part finance its needs for repayment of unsecured loans/inter-corporate deposits from the promoter group (Rs. 12.00 cr.), working capital (Rs. 12.29 cr.), and repayment/prepayment of certain borrowings (Rs. 4.50 cr.), SIL is offering a rights issue (RI) of 9752290 equity shares of Rs. 10 each at a price of Rs. 30 per share to mobilize Rs. 29.26 cr. The company is offering the right shares in the ratio of 5 shares for every 9 shares held as of the record date of September 06, 2022. The issue opens for subscription on September 15, 2022, and will close on September 21, 2022. The full amount is to be paid on application.  Post allotment, shares will be listed on BSE. SIL is spending Rs. 0.47 cr. for this RI process. 

The issue is solely lead managed by Chartered Finance Management Pvt. Ltd. and Link Intime India Pvt.  Ltd. is the registrar to the issue.

Post RI, SIL's current paid-up equity capital of Rs. 17.55 cr. will stand enhanced to Rs. 27.31 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 81.92 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, SIL has (on a consolidated basis) posted turnover/net profits - (loss) of Rs. 95.52 cr. / Rs. - (10.33) cr. (FY20), Rs. 50.44 cr. / Rs. - (23.56) cr. (FY21), and Rs. 104.14 cr. / Rs. - (29.86    ) cr. (FY22). Thus it has marked losses on the inconsistent top line. As of March 31, 2022, its paid-up equity capital of Rs. 17.55 cr. had 37.18 cr. negative reserves.

As per unaudited results filed with the exchange, SIL has earned a net profit of Rs. 0.02 cr. on a turnover of Rs. 30.71 cr. for Q1 of FY23. As of June 30, 2022, it had a negative NAV of Rs. 11.17 per share. 

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer documents to date.  It will adopt a prudent dividend policy post listing of RI, based on its financial performance and future prospects. It last declared a dividend of 2% for FY19 and paid it only to the public shareholders. 

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 521113:
The scrip last closed on cum-right basis at Rs. 34.05 on September 05, 2022, and opened on an ex-right basis at Rs. 32.15 on September 06, 2022. Since then it has marked a high/low of Rs. 33.25 / Rs. 30.15. The scrip last closed at Rs. 31.10 as of September 12, 2022. Based on this quote, its post-RI market cap stands at Rs. 84.92 cr. This counter is having thin trades and is currently under GSM-stage 0. 

The scrip has posted the last 52 weeks high/low of Rs. 52.64 / Rs. 13.32 (post adjustment of Ex-RI impact). Promoter holding has been at 67.06% for the last three quarters ending with June 22. The counter is maintained above the RI price indicating some wasted interest game.