Transwarranty Finance RI review (Avoid)

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•    TFL is an NBFC engaged in financial services and related business. 
•    It has been posting losses for the reported periods.
•    It has not paid any dividends since 2013.
•    Though at par, this RI has a negative P/E as well as NAV.
•    There is no harm in skipping this RI offer. 

Transwarranty Finance Ltd. (TFL) is a non-deposit taking Non-Banking Financial Company (NBFC-ND) registered with RBI to carry on the NBFC activities under Section 45IA of the Reserve Bank of India Act, 1934 bearing Registration No. B-13.00971. TFL is a full-service Financial & Capital Market Services Company. It is engaged in lending and advisory services. 

As an NBFC, it operates in the business of providing small-ticket personal loans to Individuals and Retail customers. Currently, the lending business comprises retail loans, SME loans, and unsecured personal loans to financially weaker sections of society and other personal loans like educational loans, etc. 

Most of the lending business is done digitally through the "OROBORO" technology platform. TFL generates the leads directly and through its channel partners with the help of new-age technology. With seamless partner integration, zero paperwork, and no face-to-face interaction, the ability to generate its own OROBORO credit score helps it take real-time loan decisions with superior customer experience. Thus, OROBORO has brought Fintech and NBFC synergies together.

In addition to a lending business, it has an established advisory business offering investment banking,
corporate finance, & trade finance services to mid-cap and small-cap companies. It also offers wealth management services through its listed subsidiary Vertex Securities Ltd. 

To meet its funding needs for working capital (Rs. 14.98 cr.), and general corporate purpose (Rs. 5.33 cr.), TFL is offering a Rights issue (RI) in the ratio of 1 share for every 1 share held by the eligible stakeholders as of the record date of November 04, 2022. TFL mulls raising Rs. 24.46 cr. post entire process for this RI is over for the issuance of 24460568 equity shares of Rs. 10 each at par value. The issue opens for subscription on November 15, 2022, and will close on November 29, 2022. To lure investors, the company is asking for Rs. 3 per share only on application and the balance of Rs. 7 by way of one or more subsequent calls from time to time. Post allotment, shares will be listed on BSE and NSE. TFL will adjust outstanding unsecured loans from the promoters to the tune of Rs. 3.70 cr. and thus the issue size will get reduced to that extent. TFL is spending Rs. 0.45 cr. for this RI process. 

The issue is solely lead-managed by Fedex Securities Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar of the issue.

Post-RI, TFL's current paid-up equity capital of Rs. 24.46 cr. (24460568 shares) will stand enhanced to Rs. 48.92 cr. (48921136 shares). Based on the RI pricing, the company is looking for a market cap of Rs. 48.92 cr. 

On the financial performance front, for the last two fiscals, TFL has (on a consolidated basis) posted total revenue/net profit (loss) of Rs. 16.17 cr. / Rs. - (2.81) cr. (FY21), and Rs. 16.57 cr. / Rs. - (2.15) cr. (FY22). NAV of its shares stands at Rs. 5.81 as of March 31, 2022. For the Q1 of FY23 ended on June 30, 2022, it has reported a loss of Rs. - (1.16) cr. on total revenue of Rs. 3.26 cr. It has been reporting losses for the reported periods and thus the RI is at a negative P/E. This RI is a costly bet even at par value.

The company last paid a dividend of 5% in September 2012 and before that it paid a dividend of 3%, 10%, and 10% in July 2009, July 2008, and July 2007 respectively. Thereafter it has not paid any dividends. It will adopt a prudent dividend policy post listings of RI shares based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 11.98 on November 03, 2022, and opened on an ex-right basis at Rs. 11.40 on November 04, 2022. Since then, it has marked a high/low of Rs. 11.53 / Rs. 10.43. It last closed at Rs. xx on November xx, 2022. The scrip has posted the last 52 weeks' high/low of Rs. 13.33 / Rs. 5.40. This indicates that the counter is well-operated and kept above the RI pricing to lure investors.  Promoters' holding has been at 53.62% for the last three quarters ended on September 30, 2022.

Conclusion / Investment Strategy

The counter is well managed for the last few months to pave the way for this at par RI. TFL’s NAV is negative and the issue is also at a negative P/E since it has been posting losses for the reported periods. Though the RI is at par, there is no harm in skipping it.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Nov 11, 2022

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.


More Transwarranty Finance Limited RI Views / Analysis / Recommendations ...

The Transwarranty Finance Rights Issue 2022 Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Transwarranty Finance Rights Issue 2022 worth investing. The Transwarranty Finance Rights Issue 2022 Note sets the Rights Issue expectations in systematic way which tells you if Transwarranty Finance Rights Issue 2022 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Transwarranty Finance Rights Issue 2022 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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