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Vikas Ecotech RI review (Avoid)

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•    Second RI within a span of seven months raises concern.
•    Promoters are holding just 15.60% as of September 30, 2021.
•    VEL has posted losses for the last 18 months working.
•    The company kept changing its name and the line of business frequently.
•    It changes its Lead Manager and Registrar for this RI. 

PREFACE:
While we are witnessing frequent debt offers from many regular visitors' corporates, a similar trend is taking place in the rights issue as well. Delhi based Vikas group has done two rights issues for Vikas Lifecare Ltd. and is not making another group company's second rights issue within seven months. The group kept shifting its operation from one entity to another one and extracting money from investors by way of rights issues. This is an operator based counter as promoters holding is just 15.60% as of September 30, 2021. 

ABOUT COMPANY:
Vikas Ecotech Ltd. (VEL) (erstwhile known as Vikas Leasing Ltd.) is primarily engaged in the business of manufacturing Specialty Chemicals focused on Specialty Chemical Additives and Specialty Polymer Compounds. Presently, its manufacturing facilities are operating at Shahjahanpur (Rajasthan) and Noida SEZ (Uttar Pradesh).

Over the years, it has established itself as a successful manufacturer of Specialty Chemicals Additives and Specialty Polymer Compound. Its products cater to various industries such as agriculture and infrastructure, packaging, organic and inorganic chemicals, electrical, FMCG, footwear, pharmaceuticals, automotive, medical devices and components and other consumer goods.

As claimed by the company, presently it is the only homegrown manufacturer in India with an in house research and development function, manufacturing Organotin Stabilizers or MTM right from tin metal. It's Organotin Stabilizers are US FDA compliant, giving it the ability to supply all over the world and substitute costly imports for Indian manufacturers locally. 

In FY19, it hived off and demerged its compound recycled and trading division to its group company Vikas Lifecare Ltd. VEL also ventured into trading in infrastructure-related materials in 2021. 

ISSUE DETAILS:
VEL is coming out with its second rights issue (RI) within six months and is surprising one and all. Its last RI was in June 2021 when it mobilized Rs. 49.12 cr. at a price of Rs. 1.35 per share against FV of Re. 1 per share. At that time, it offered 13 shares for every 10 shares held. The issue was lead managed by Mark Corporate Advisors Pvt. Ltd. and Alankit Assignments Ltd. was the registrar. For this issue, it has appointed a new Lead Manager Hexaxis Advisors Ltd. and changed its registrar to Bigshare Services Pvt. Ltd. For this RI it is issuing 12 shares for every 25 shares held as on the record date of November 25, 2021. It will be issuing this rights issue at Rs. 1.60 per share and the shareholders will have to pay 50% i.e. Rs. 0.80 on application and the balance on one or more calls as determined by the board of directors from time to time.  Post allotment, shares will be listed on BSE and NSE. 

The company will be issuing 309009241 shares of Re. 1 each at Rs. 1.60 per share to mobilize Rs. 49.44 cr. This RI is opening for subscription on December 07, 2021, and will close on December 21, 2021. Post issue, VEL's current paid-up equity capital of Rs. 34.38 cr. will stand enhanced to Rs. 95.28 cr. (952778493 shares). Based on the RI pricing the company is looking for a market cap of Rs. 152.44 cr. After spending Rs. 0.84 cr. for the RI process, the company will utilize the residual portion for adjustment of loans from promoters (Rs. 6.00 cr.), working capital (Rs. 30.25 cr.) and general corporate purpose (Rs. 12.35 cr.). So all these purposes are indicating grey areas. 

FINANCIAL PERFORMANCE: 
On the financial performance front, for FY21 it incurred a loss of Rs. - (14.35) cr. on a turnover of Rs. 116.18 cr. For the first half of FY22 ended on September 30, 2021, it has posted a loss of Rs. - (3.28) cr. on a turnover of Rs. 92.07 cr. Thus for the past 18 months, it has been incurring losses. As of September 30, 2021, promoters holding was at 15.60% (up from 9.42% as of June 30, 2021).

SCRIP PERFORMANCE: AS PER BSE WEBSITE: (SCRIP CODE - 530961).
The scrip last closed cum-right at Rs. 2.73 on November 23, 2021, and opened at Rs. 2.44 on the ex-rights basis on November 24, 2021. Since then it has posted a high/low of Rs. 2.59/ Rs. 2.00 and its last closing price was Rs. 2.26 (as of December 06, 2021). At this closing price, its market cap comes to Rs. 215.33 cr. For the last 52 weeks, it has posted a high/low of Rs.3.35/Rs. 1.01. Considering low promoter's holding, this counter appears operator based. 


Conclusion / Investment Strategy

Stay away from this operator based counters wherein, second rights issue within a span of just seven months raises concern. Its financial performance too not match its asking price.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Dec 6, 2021

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 Vikas Ecotech Limited RI Views / Analysis / Recommendations ...

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