Ushanti Colour NSE SME RI review - (Avoid)

•    UCCL is in the business of manufacturing and trading of various colours of dyestuffs.
•    It marked list-less performance for the last two fiscals.
•    The public domain as well as the offer document is missing its latest financial data. 
•    The issue appears aggressively priced. The counter marks irregular trading.
•    There is no harm in skipping this "High Risk/Low Return" pricey offer.

PREFACE:
The company came with its maiden IPO in July 2018 at a price of Rs. 60 per share to mobilize Rs. 11.56 cr. and is still on NSE SME Emerge. It is now offering RI at a price of Rs. 50 per share to mobilize Rs. 2.94 cr. Currently the counter is marking irregular trades with a range bound quote and well maintained above the RI price to tempt investors. It has marked listless performance for the last two fiscals. At the time of maiden IPO, Pantomath Capital Advisor was the lead manager and now this RI is self-managed by the company itself. Its offer document has some mismatches. Company's website does not have any latest financial results data, the last data available on their website is for September 30, 2023, and missing its H2 -FY24, FY24, and H1-FY25 financial data. How, NSE has cleared its RI offer documents without the latest financial info, it a million-dollar question.

ABOUT COMPANY:
Ushanti Colour Chem Ltd. (UCCL) is in the business of manufacturing and trading of various colours of dyestuffs since 1993 till 2013. After getting permission for manufacturing of CPC Blue Crude dyestuff and witnessing the growing demand of CPC Blue product the Company decided to focus into business of manufacturing on one specific product type and specialize in it. UCCL manufactures reactive and direct dyestuffs also known as Synthetic Organic Dyes with an integrated production process. The company also manufactures Copper Phthalocyanine, Blue Cued which are one of the major raw materials used for manufacturing of Dyestuffs. 

The pigment and dyestuffs manufactured by it caters to the raw material requirement of textile, garment, cotton, leather, nylon, paper, wool, ink, wood, plastic and paint industries. It concentrates in manufacturing "Turquoise Blue" Dyestuffs and Pigments. The Company has 3 manufacturing facilities situated together at Vatva GIDC in Gujarat. The facilities are spread over 2,739 sq. meters in total area. The company also has its own Ice generation machinery, further it recovers Ammonium Carbonate from its effluent stream which are reused in the plant as well as sold to the Soda Ash Industry reducing wastage giving incremental revenue. 

The Company currently has a production capacity of approx. 2,520 tons per annum. The manufacturing facilities are equipped with requisite machineries to keep a constant check on quality. The company is an ISO 9001:2015 certified company certifying the quality of the product our company manufactures. The Company manufactures dyes of various concentrations which influences the pricing of the product. It procures quality raw materials from Chemical industries present in Domestic markets who manufactures intermediates of dyestuffs. UCCL's focus on "Turquoise Blue" Dyestuffs has assisted it to be become a niche player in the segment. The company generates most of its revenue from export operations. Products of the company are exported to countries like, Turkey, Egypt, Bangladesh, Pakistan, Indonesia, China etc. Its customers are mostly traders who sell directly to textile manufacturers as well as other industries. 

The trading activity of the Company is dependent upon the orders received from its customers. In case of a bigger order which Company is not being able to fulfil out of its existing manufactured products and in order to meet such demand, the Company gets the differential quantity from the market. As of September 30, 2024, it had 54 employees on its payroll. 

ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 535085 equity shares of Rs. 10 each at a fixed price of Rs. 55 per share to mobilize Rs. 2.94 cr. The RI opens for subscription on November 04, 2024, and will close on November 25, 2024. The company is offering RI in the ratio of 5 for 100 to its eligible stakeholders as of the record date of October 11, 2024. 

The full amount is to be paid on application for number of shares applied. Post allotment, shares will be listed on NSE SME Emerge. The company is spending Rs. 0.25 cr. for this RI process, and from the net proceeds, it will utilize Rs. 1.96 cr. for working capital, and Rs. 0.73 cr. for general corporate purposes. 

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

Post-RI, company's current paid-up equity capital of Rs. 10.70 cr. will stand enhanced to Rs. 11.24 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 61.80 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, it has posted a total income/net profit of Rs. 46.52 cr. / Rs. 1.80 cr. (FY23), Rs. 45.27 cr. / Rs. 1.34 cr. (FY24). No financial data is available post September30, 2023 in the offer document, on the company's website as well as on the website of the designated stock exchange. This is not only shocking but also a big surprise to one and all. 

DIVIDEND POLICY:
The offer document is silent on its dividend policy. It paid a last interim dividend of 2% in October 2019. It will adopt a prudent dividend policy based on its financial performance and future prospects.

SCRIP PERFORMANCE: BASED ON NSE WEBSITE DATA: SCRIP CODE: UCL (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 66.00 on October 11, 2024, and opened on an ex-right basis at Rs. 66.00 on October 18, 2024. Since then, it has marked high/low of Rs. 66.00 / Rs. 56.55.  The scrip last closed at Rs. 57.00 as of October 31, 2024. For the last 52 weeks' it has posted a high/low of Rs. 75.20 / Rs. 49.70.  The counter is currently under ESM: stage 2.

The promoters' holding has been constant at 67.86% for the last two quarters ended September 30, 2024. The counter is well managed above RI pricing.