Swiss Military Aug 22 RI review - (May apply)

•    This is the 2nd rights issue (RI) from SMCGL within a year.
•    The first RI was in November 2021 at a par value for Rs. 9.83 cr.
•    Sudden boost in the top and bottom lines for FY22 raises eyebrows.
•    Counter is well operated by vested interest to lure investors for RI.
•    Based on its current financial data, RI is fully priced. 

ABOUT COMPANY: 
Swiss Military Consumer Goods Ltd. (SMCGL) is primarily engaged in the business of promoting, marketing and selling lifestyle products of all kinds including but not limited to travel gear, bags, key chains, mugs, golf accessories, electric and electronic products, gift items of all kinds & all other allied items, under the brand "Swiss Military".

Further, the Company has also started the business of developing, designing, manufacturing, importing, exporting, distributing Radio Frequency Identification (RFID) logistics or container seals, Radio Frequency Identification (RFID) and Geographic Information system (GIS) products & solutions and now company is ready for the next leap of business of RFID e-seal and ready to commence operation.

"Swiss Military" is an internationally renowned and celebrated Swiss brand which is duly registered in over 40 countries and has had a Global presence for many decades. Over the decades of the brand's existence, it has made a strong presence in 26 countries globally, with brand registrations in 40 countries across various product segments namely travel gear, writing instruments, watches, home appliances garments, innerwear, loungewear, accessories, kitchenware, eyewear, leather goods, outdoor/hiking, footwear, cosmetics & electronics with over 1900 present SKUs in the global portfolio. Over the years the brand has made its global footprint and is synonymous with affordable lifestyle products.

The brand is owned by M/s Promoshirt SM S.A., a Swiss Company which is a wholly owned subsidiary of M/s Promoshirt SM Private Limited, which is the holding Company of M/s Swiss Military Lifestyle Products Private Limited, an entity belonging to the Promoters of SMCGL. As of the date of this Letter of Offer, it has 70 (Seventy) employees on its payroll.

ISSUE DETAILS:
To part finance its needs for adjustment of unsecured loans from promoters (Rs. 10.00 cr.), working capital (Rs. 24.97 cr.) and general corporate purposes (Rs. 8.91 cr.), SMCGL is coming out with the right issue (RI) of 98296996 equity shares of Rs. 2 each at a fixed price of Rs. 4.5 per share to mobilize Rs. 44.23 cr. The company is issuing RI in the ratio of 1 share against 1 share held by the eligible stakeholders as of the record date i.e. July 23, 2022. The issue opens for subscription on August 10, 2022, and will close on August 25, 2022. The full amount is payable on the application. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.35 cr. for this RI process. 

The issue is solely lead managed by Turnaround Corporate Advisors Pvt. Ltd. and Alankit Assignments Ltd. is the registrar to the issue.

This is the second rights issue from SMCGL within a year. Its last RI was in November 2021 in the ratio of 1 for 1 at a par value for Rs. 9.83 cr. 

Post RI, SMCGL's current paid-up equity capital of Rs. 9.83 cr. will stand enhanced to Rs. 19.66 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 88.47 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, SMCGL has posted turnover/net profits of Rs. 4.06 cr. / Rs. - (0.20) cr. (FY20), Rs. 5.24 cr. / Rs. 0.03 cr. (FY21) and Rs. 55.70 cr. / Rs. 2.75 cr. (FY22). The quantum jump in FY22 performance raises eyebrows.

As per BSE filing data, the company has earned a net profit of Rs. 1.35 cr. on a turnover of Rs. 23.18 cr. for Q1 of FY23. 

DIVIDEND POLICY:
The company has not paid any dividends since its incorporation. It will 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: 523558:
The scrip last closed on cum-right basis at Rs. 27 on July 20, 2022, and opened on an ex-right basis at Rs. 17.15 on July 21, 2022. Since then it has marked a high/low of Rs. 19.30 / Rs. 15.10. The scrip last closed at Rs. 19.10 as of August 05, 2022. Based on this quote, its post-RI market cap stands at Rs. 375.49 cr. The scrip has posted the last 52 weeks high/low of Rs. 22.45 / Rs. 2.83 (post adjustment of Ex-RI impact). Promoters holding is around 66.67% for the last three quarters. The counter is being rigged by vested interest to lure investors for its second RI with a 225% higher premium than the first RI.