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Vikas Ecotech Right Issue review (Avoid)

Vikas Ecotech Limited Logo

•    The company kept changing its name to lure investors based on fancy for the segment.
•    VEL has suffered a severe setback in the last 21 months working.
•    The counter is operator driven, promoter's stake is just below 9% as of 31.03.2021.
•    Investors can ignore this costly offer.

ABOUT COMPANY:
Vikas Ecotech Ltd. (VEL) was originally promoted as Vikas Leasing Ltd. which was then renamed as Vikas Profin Ltd. and then to Vikas Globalone Ltd. and then to its current name. Thus with frequent name change over the periods, the group tried to lure investors with the segment that marked fancy amidst changing market moods.

VEL is primarily engaged in the business of manufacturing of Specialty Chemicals focused on Specialty Chemical Additives and Specialty Polymer Compounds. The Company is also ISO 9001:2015 certified company. 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.

RIGHTS ISSUE DETAILS:
The company is coming out with a rights issue of 363869577 equity share of Re. 1 each at a price of Rs. 1.35 per share to mobilize Rs. 49.12 cr. The company is offering rights in the ratio of 13 shares for every 10 shares held as on the record date of June 10, 2021. The issue is opening for a subscription on June 15, 2021, and will close on June 29, 2021. Post allotment shares will be listed on BSE and NSE. The company will be spending approx. Rs. 0.87 cr. for the rights issue process.

While the company will be adjusting Rs. 5 cr. loan portion against the entitlement of rights shares to the promoters, from the residual portion it will utilize Rs. 28.05cr. for working capital needs, Rs. 3.70 cr. for partial repayment of ICICI Bank loan and Rs. 11.50 cr. for general corporate purpose. Thus the major portion of the rights issue fund will be going for working capital and general corporate use that is having many grey areas.

Post issue, company's current paid-up equity capital of Rs. 27.99 cr. will stand enhanced to Rs.64.38 cr. The issue is solely lead managed by Mark Corporate Advisors Pvt. Ltd. and Alankit Assignments Ltd. is the registrar to the issue.

FINANCIAL PERFORMANCE:
On the financial performance front, VEL has posted turnover/net profits of Rs. 259.24 cr. / Rs. 15.01 cr. (FY19) and Rs. 199.20 cr. / Rs. 1.02 cr. (FY20). AS per unaudited results for the nine months ended on December 31, 2020, of FY21, it has posted a loss of Rs. 3.43 cr. on a turnover of Rs. 8.46 cr. As per management, it has suffered a severe setback in FY 21 following the pandemic.

SCRIP PRICE MOVEMENT ON BSE:
As per BSE Website data, the scrip turned ex-right on June 09, 2021, at Rs. 2.04 at the close. On June 08, 2021, it closed at Rs. 2.71 on cum-right basis. The scrip last quoted at Rs. 2.24 (as of June 11, 2021) and has posted 52 weeks high/low of Rs. 8.30/ Rs. 1.17. As of March 31, 2021, promoters holding got reduced to 9.42% from 17.09% as of December 31, 2020. The counter is operator driven. All recent price movements after June 08, 2021, are with very thin volumes.

Based on its rights offer price, the company is looking for a market cap of Rs. 86.91 cr. whereas based on its last traded price, the market cap stands at Rs. 144.20 cr. based on its last traded price of Rs. 2.24.


Conclusion / Investment Strategy

Considering its last 21 months’ financial data, it is suffering a severe setback and at the offer price, the rights issue is priced exorbitantly. There is no harm in staying away from this offer.

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Jun 12, 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

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