Vaxfab Enterprises RI review (Avoid)

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•    VEL is in the business of trading in Agri products and textile materials. 
•    Based on its recent financial data, the issue is aggressively priced. 
•    The promoters' holding is below 1% and is a big alert.
•    Six-fold jump in paid-up equity capital may face servicing issues. 
•    There is no harm in ignoring this pricey RI.

Vaxfab Enterprises Ltd. (VEL) - (erstwhile known as Ellora Trading Ltd.) is primarily in the business of trading Agriculture Products and has recently commenced its operations in the segment of trading Textile Products and Clothing. The offer document is silent on its human resources data. 

The company is offering a rights issue (RI) of 7200000 equity shares of Rs. 10 each at a fixed price of Rs. 18 per share to mobilize Rs. 12.96 cr. VEL is issuing 6 shares against 1 share held by the eligible shareholders as of the record date of January 03, 2023. The issue opens for subscription on January 18, 2023, and will close on February 01, 2023. The full money is to be paid along with the application for the number of shares applied. Post allotment, shares will be listed on BSE and CSE (Calcutta Stock Exchange). The company is spending Rs. 0.40 cr. for this RI, and from the net proceeds, it will utilize Rs. 11.34 cr. for working capital, and Rs. 1.22 cr. for general corporate purposes. 

This RI is self-managed by the company and Cameo Corporate Services Ltd. is the registrar of the issue. 

Post-RI, VEL's current paid-up equity capital of Rs. 1.20 cr. will stand enhanced to Rs. 8.40 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 15.12 cr. 

On the financial performance front, for the last two fiscals, VEL posted a total revenue/net profit (loss) of Rs. 1.20 cr. / Rs. - (0.01) cr. (FY21), and Rs. 0.37 cr. / Rs. 0.01 cr. (FY22). As per BSE filings, for 3Qs of FY23, it posted a net profit of Rs. 0.11 cr. on total revenue of Rs. 2.42 cr.

Thus the company's financial data has inconsistency in its top and bottom lines. 3Qs of FY23 appear to be window-dressed data. 

The company has not declared any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

The scrip last closed on cum-right basis at Rs. 43.45 on January 02, 2023, and opened at Rs. 22.70 on an ex-right basis on January 03, 2023. Since then, it marked a high/low of Rs. 32.95 /Rs. 22.70. The scrip last closed at Rs. 32.95 on January 16, 2023 (till writing this review). The scrip has posted the last 52 weeks' high/low of Rs. 32.95 / Rs. 8.14. The counter is well managed with a thin volume above the RI price. The promoter's shareholding declined from 25.77% as of March 31, 2022 quarter to 0.78% as of September 30, 2022 quarter which is a major concern. Currently, the counter is under ASM ST: Stage 1., but it is being rigged to lure investors for subscribing to RI.

Conclusion / Investment Strategy

The RI is aggressively priced if we relate it to its financial performance so far. Declined promoter’s holding is a big alert. Despite the low promoter’s holding, the counter is well managed by the vested interest to lure investors for this pricey RI. There is no harm in ignoring it.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jan 16, 2023

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.

Email: dilip_davda@rediffmail.com

More Vaxfab Enterprises Limited RI Views / Analysis / Recommendations ...

The Vaxfab Enterprises Rights Issue 2023 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 Vaxfab Enterprises Rights Issue 2023 worth investing. The Vaxfab Enterprises Rights Issue 2023 Note sets the Rights Issue expectations in systematic way which tells you if Vaxfab Enterprises Rights Issue 2023 good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Vaxfab Enterprises Rights Issue 2023 by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.


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